ECO 2210[ECONOMIC PRINCIPLES AND ISSUE] 8AC1

ECO2210
ECONOMIC PRINCIPLES AND ISSUE

Course code

: ECO2210

Section

: 8AC1

Title

: Individual Assignment 1

Students name

: Beng Putra

Student I/D

: I12001388

Lectures name

: MR SEYED

MOHAMAD MEHDI TASALOTI

Date of submissions

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: 23/09/2013

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TABLE OF CONTENT
1. INTRODUCTION
3
1.0. DEFINITION
3
1.1. ECONOMIC QUESTION PROBLEM ALL ECONOMIC FACE
4
1.2. FACTOR OF PRODUCTION OF ECONOMY SYSTEM
5
1.3. THE FUNCTION OF FOUR QUESTION OF THE ECONOMIC
SYSTEM

1.4. THERE HAVE 5 MAIN TYPES OF ECONOMIC SYSTEM

8
2. CONTENT

2.1. THE GENERAL ESSENTIAL CHARATERISTIC OF MIXED

ECONOMY

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2.2. THERE ARE 5 CHARATERISTIC OF FEATURES OF MIXED
ECONOMY

11

2.3. OWNERSHIP OF RESOURCES OF THE MIXED ECONOMY

12
2.4. ALLOCATION RESOURCE OF MIXED ECONOMY SYSTEM
13
2.5. ROLE GOVERNMENT OF MIXED ECONOMY SYSTEM
14
2.6. GOALS AND POLICES SYSTEM OF MIXED ECONOMY
SYSTEM

15

2.7. ADVANTAGES OF MIXED ECONOMY

15
2.8. DISADVANTAGES OF MIXED ECONOMY
17
3.0. CONCLUSION
17

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REFERENCES LIST
18

1.0 DEFINITION
Economy system is a blend of the rules or ways into a
single unit and used to achieve economy with objectively. To cover
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the purpose entire processing and society action in effort to need
reach their necessary. It refers to the role or model of distribution
and production which take place in the society.
1.1.

ECONOMIC

QUESTION

PROBLEM

LimitedECONOMIC FACE

ALL

Unlimited

resources

Wants

Scarcity
We must make Choice about:
1. What to produce good and service?
2. How to produce goods and service?
3. for whom to produce goods and
service?
4. How to distribution produce goods
and services?
We choose 5 economy systems with determine which are:

Traditional
economy
system

Market
economy
system

Command
economy
system

Mixed
Economy
System

Islamic
Economy
system

Scarcity is a perpetual problem facing society due to limited

resources and unlimited wants and needs satisfied with these

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resources. Scarcity means that society does not have enough of
everything resources for everyone wants and needs (anualweb,
n.d).

Two Components
Consider the two sides of the scarcity problem:
1. Unlimited Wants are this is a basic characteristic of
humanity which means that people are never totally satisfied with
the quantity and variety of goods and services. It means that
people never get enough, that there is always something else that
they would want or need.
2. Limited Resources: This is a basic condition of nature
which means that the quantities of available resources used for
production are limited. It means that the economy has only so
many resources that can be used AT ANY GIVEN TIME. Time to
produce other goods and services.

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1.2. FACTOR OF PRODUCTION OF ECONOMY SYSTEM

1. Land All the natural resources on the land, in addition to
the land itself. Any improvements people have made to the
land.
2. Labor The mental and physical efforts of human workers.
The process of making things requires labor.
3. Capital Human-made resources used to make products or
deliver services. Capital has 2 kinds of production:
1. Physical capital all the tools, machines, and other
equipment a business needs.
2. Human capital the skills and knowledge of a
companys workers.
4. Entrepreneurship A person who starts and manages a
business. they take a risk by investing money in a new
business

in

the

hope

of

earning

profit.

Without

entrepreneurship, the other resources cannot be used

efficiently and productively.

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1.3. THE FUNCTION OF FOUR QUESTION OF THE

ECONOMIC SYSTEM:
1. What to produce Goods and services?
To deciding what goods and services are to be produced and in
what quantity. This involves the allocating of scarce resources
in relation to the composition of total output in the economy. It
is to see that goods and service and produced in accordance
with the availability of resources and in what quantity and thus,
allocation of resources depend upon the administration.
2. How to produce Goods and Services?
To deciding how to produce goods and services with what
combinations and what method of production. This method is
primarily dependent upon the available resources within the
economy. It deals with utilizing the most efficient process to
produce the goods and services.
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3. for whom to produce goods and services?
To deciding about distribution of goods and services produced
in their final form and determined through needs of individual
through their contribution towards the production process.
4.

How

to

should

be

distribution

goods

and

services?

(Additional point)
Depending on distributor which economic process making such
as goods and services call production. How producers to
distribute which goods and services are produces to consumers
to making consume become prosperous.
1.4. THERE HAVE 5 MAIN TYPES OF ECONOMIC SYSTEM:
1. Traditional Economy system: a system where tradition
customs and society beliefs shape the goods of products
with creates by them. Where the Countries that use this type
of economic system are at rural and farm-based or in old
era.
2. Market Economy system:

a system where the people

decided made through the market mechanism which the

forces of demand and supply, without any government,
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interference, determine how resources are allocated as
called free enterprise or free market.
3. Command Economy system: a
government

makes

decision

system

all

where

economic

the

market,

production, and allocated to consumers. This is a great deal

of planning economies tend to be run by the government, in
theory , the government want to see greater economic
equality between consumers.
4. Mixed Economy system: a System where some goods and
services are produced in the free-market sector of the
economy,

but

others

are

government.
5. Islamic Economy system:

produced

by

the

state

or

an economic systems where

people studies the economic problems of filled with the

values of Islamic.
2.0. DEFINITION OF MIXED ECONOMY
A

"mixed"

economy

is

mix

between socialism and capitalism. Mixed economy is a system

economy mix between market economy and a centralized system,
which the government and the private sector interact in solving
economic problems by combination. The capitalist system and the
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socialist system which took middle line between freedom and
control that means absolute line between the role of state and
individual prominent role. A mixed economy occurs when both the
private sector and the state direct the economy. Many countries
follow this economic structure. Countries that have a mixed
economic system include the United States of America,
United Kingdom, Australia, Japan, Germany, Canada, Italy,
South Africa, Slovenia, Mexico and Malaysia even in
Indonesia also using this mixed economy structure.
Three questions of a mixed economy system:

2.1. THE GENERAL ESSENTIAL OF CHARATERISTIC OF

MIXED ECONOMY:

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1. The means of production are owned and controlled by
private sector as well as the government.
2. The people decides on economy activities within the
economy
3. The combination of the best features of capitalist and
command economies are observable in the market
4. The problem of distribution goods and services, allocation
of economic resources are determined through

combination of the market and governmental laws and

policies .

2.2. THERE ARE 5 CHARATERISTIC OF FEATURES OF

MIXED ECONOMY
1)

Public sector: all decision regarding what, how and for

whom to produce is taken by the state. Public utilities such as

road construction, power supply, water supply are in the side of
public sector. These public utilities are operating for societal
welfare maximization not for profit motives.
2) Private

sector: There is private sector in which

production and distribution of goods and services are carried out

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by private enterprise. Profit motive is the guiding principle in this
sector.
3)

Joint sector: there is joint sector where both state and

private jointly run enterprise. It is organized on the basis of a joint

stock company where majority of shares are held by the state.
4)

Freedom and control: in mixed economy there is

every freedom to own private property, earn profit, to consume,

produce, distribute and to have any occupation of choice without
limitations until unless such possessions have an adverse effect
on public welfare so that state intervenes in order to control and
regulate the situation.
5) Economic

planning:

There

is

central

planning

authority in a mixed economy. In this system, economy operates

on basis of some economic plan. All sectors of economy function
in accordance with the objectives, priority and targets laid down
in the plan.
2.3. OWNERSHIP OF RESOURCES OF THE MIXED ECONOMY:
Private ownership of land and capital is an important
element of the free enterprise system and the essential features
of a mixed economy. Under an independent company, individuals
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are free to own property and carry out their own work. A mixed
economy defends capitalist economic elements but also allows
some government ownership of industry. Private ownership rates
and free enterprise differ across different economic mix. U.S.
emphasizes free enterprise while other countries nationalize
certain industries, such as utilities, transportation and energy.
Moreover, business personal property in a mixed economy may
be required to comply with various government regulations. Even
communist China's economy includes a number of features that
suggest that the market can be considered as a mixed economy;
albeit one that retains many of the features of the socialist
planned economy. Watch the Website Economic eyes that the
Chinese government reforms have resulted private business in
the manufacturing and services sectors (ehowco, n.d).

2.4. ALLOCATION RESOURCE OF MIXED ECONOMY

SYSTEM
In

mixed

economic

system

with

combining

the

governments plan to use the free market. An important feature of

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a mixed economic system and that the private issuer that has
ownership of the resources, as well as free market, they have the
freedom to determine the allocation of their resources. In order to
produce, determine the production of goods and services to
produce based on price signals with the ultimate goal to maximize
the benefits of how much. However, mixed economic system, with
the goods, they are different from the free market economic
system with some scarce to produce services that thinks their
country into the public sector and the government, people, and
need to be willing. And products and services are goods and
services, as examples of goods and services as a public benefit
and injection defense and education, and street lighting. By
controlling the use of certain resources and ownerships, high
unemployment, when the national government, that to build a
factory to create jobs for people to use the resources you can.
Furthermore, it is possible to provide services or goods to the poor
governments do not have the ability to pay needs to use its
resources (Economicgrumble, 2012).

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2.5. ROLE GOVERNMENT OF MIXED ECONOMY SYSTEM
In a mixed economy, the governments besides public sector
play an important role in the economic life of the state through
the revenue and expenditure measures of its budget. The
important functions are:
(i)

Allocation function:
Government provides public goods such as defense, public

administration,

and

other

that

different

from

personal

belonging. These items cannot be delivered through in market

mechanism. But, it is necessary for the user and so the
government has given them. The Government has allocated
resources among the personal belongings and public goods.
(ii)

Distribution function:

Through taxes and government spending affect the basic

personal income distribution house in a fair way. So, their taxes
will be the rich and shop for projects that benefit poorer.
(iii) Stabilization function

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The country's economy is affected by economic fluctuations,
such as depression and explosion conditions. The changes are,
virtues and other hazards. This is required by the government
policy measures that can affect the fit in this case, the overall
level of demand. It's called the actions and measures to
stabilize. The purpose of this step is to avoid the conditions of
unemployment and inflation.
2.6. GOALS AND POLICES SYSTEM OF MIXED
ECONOMY SYSTEM
A basic level is the pursuit of economic to purpose mixed
economy by using different basis. There have 5 basics to aim such
as: a public, full employment, stability, economic growth,
efficiency and fair. Governments bear the primary responsibility,
pursuing 5 objectives of economic policy to help: the user, control
and

regulate

voluntary

exchange

market.

Elected

officials,

government agencies set up, management and law through

Congress, the decision of the court to the actions taken by the
rule: take the basic form (amosweb, n.d).
2.7. ADVENTAGES OF MIXED ECONOMY:
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In mixed economy, both the government and the private
sector jointly control the economic structure. There are numerous
advantages of a mixed economy.
1. Provide fair competition: with the presence of private
companies to ensure that there has fair competition in the
market, the quality of products and services are not interrupted.
2. The market price arranged with both the Government and
the regulatory bodies which ensure that market price does not
exceed the actual price.
3. Optimal utilization of national resources In a mixed
economy,

resources

are

used

as

efficiently

as

well

the

government and private companies take advantage of them.

4. People were given more powers: People generally have
more say when it comes to quality, the price of products and
services.
5. A mixed economy system is not allowed a totally
monopoly: prevent a few sector, mixed economy does not allowed

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monopoly because government and private company to enter any
business sector.
Mixed economy is helping to increase national production.
Both public and private sectors are working hard to bring more
production. Problems created by free enterprise and public control
too much solved through a mixed economy. It gives company the
freedom of ownership of productive social welfare benefits and
political freedom. All national resources are used in a mixed
economy.(blurtit , n.d).
2.8. DISADVETAGES OF MIXED ECONOMY:
1. Government within several the case of very influential in
the economy, engineering change policy interest rates, taxes and
the money supply in an effort to reach the target.
2. In several countries the economy is driven by the private
sector, with those who are responsible for overall economic
growth, at a time of instability, and because changes in their
respective markets, unemployment, inflation and recession.

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3. Some sectors of the economy operating as a monopoly,
whether they are run privately or by the government. It monopoly
stand a greater risk of being inefficient, which could result in
higher prices for consumers.
4. This economic system can be difficult to know how
much

the

government

should

intervene,

for

example,

discretionary fiscal policy can create problems such alternative

government loans.
5. Mixed economy which was criticized by the Socialist to
let market forces too much, causing imbalances and inefficient
allocation of resources.
Mixed economy is a half-way house. This does not help in
achieving optimal use of national resources. Mixed economy
suffers from a lack of both capitalism and socialism. Rarely mixed
economic progress. It had kept back wardness. In a mixture of
different types of economic waste occurs in the economy (blurtit,
n.d).
3.0. CONCLUSION

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In mixed economy, they have advantages and
disadvantages of mixed economic which has chance in certain
time. Also Mixed economy has goods characteristic that we can
produce free market and free sector but in other hands, we still
under control by the government about the high taxes that we
must do payment it. for defects prevent discrimination and the
specific steps can be completed works efficiently in the public
sector, to eliminate the shortages. Thus, the private sector can
also improve work efficiency, control and direction. By following
these steps, fiscal savings and the real economic instability can
be removed.

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At<http://www.s-cool.co.uk/a-level/economics/free-market-vcommand-economies/revise-it/theoretical-economic-systems>
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13. Economicsonline, n.d. three question picture of economy
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