1. 3. The Pros and Cons of Each Economic System
1.1. The benefits of capitalism include the ability of individuals or groups to own a business and profit from it. Entrepreneurship is encouraged due to relatively low taxes. Businesses typically have a lot of competition which helps keep prices down and gives consumers many choices. The downside is that capitalism creates stratification of classes and does not favor equality. This means that the poor, elderly, or disabled are at a disadvantage because of their inability to contribute.
1.2. Socialism and communism share a common thread in that they favor government control of resources. This allows for equality among individuals because resources are distributed evenly. Individuals are provided basic needs like healthcare and education for free. The downside is that equality comes at the cost of extremely high taxes. High taxes also inhibit entrepreneurial activity. Also, there is no incentive for people to work diligently as they are paid the same wage to work hard or not.
2. 4. The Economic System of the U.S.
2.1. The United States is predominantly a capitalist economy but also has some characteristics of a socialist economy. Most economies of the world have mixed economies. In recent years, the U.S. government has strived to correct the inequalities that can be created by capitalism. More focus has been given on the areas of assisting the poor, elderly, and disabled. As socialist economies prove, though, assistance comes with a cost, being higher taxes. In the U.S., these taxes will likely come from the wealthiest individuals in the country.
3. References
3.1. Nickels & McHugh. (2018). Introduction to Business: Understanding Business (11th ed.). Retrieved from The University of Phoenix eBook Collection database.
4. 1. Importance of an Economic System
4.1. It is important to have an economic system because it determines how society will employ resources to produce goods and services, then distribute them among individuals and competing groups (Nickels & McHugh, 2018).
5. 2. Main Types of Economic Systems
5.1. There are three basic types of economic systems: market or capitalism, command or communism, and socialism, which has characteristics of both market economics and command economics.
5.1.1. Capitalism is a free market approach to economics. It is characterized by the right to own private property, the right to own a business and keep profits, the right to freedom of competition, and the right to freedom of choice (Nickels & McHugh, 2018).
5.1.1.1. A good example of this economic system is the United States.
5.1.2. Command or communist economies are characterized by government control of all resources (Nickels & McHugh, 2018).
5.1.2.1. A good example of this type of economic system is North Korea.
5.1.3. Socialism has characteristics of a command economy in that the government controls most resources. However, entrepreneurs have the ability to own and run small businesses which is a characteristic of capitalism (Nickels & McHugh, 2018).
5.1.3.1. A good example of this type of economic system is China.