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Economic Systems forum

Most economists argue that the free market economy, also known as capitalism, is the best type of
economic system.
What do you understand by the term "capitalism"?
Do you think that the free market is the best system for allocating goods and resources?
Briefly explain what type of economic system you think your country has?
What types of market structures are you familiar with?

Capitalism refers to an economic system in which all economic decisions are made
by individual consumers and firms, without any government intervention (Sloman,
2006). Within this system, there is free decision making by all the parties involved.
Individuals are free to choose what to buy with their incomes and are equally free to
make demand decisions. On the other end, firms are free to choose what they to
produce, what factors they want to employ in production and are also free to make
supply decisions. The interaction of buyers and sellers in free markets enables
goods, services, and resources to be allocated prices. This can be further explained
through one of the most important attributes of the free market system, the price
mechanism.
The demand and supply of a good or service determines the price such that prices
respond to surpluses or shortages. A surplus causes the price to fall. A surplus
occurs when supply is greater than demand (consumers decide they want less of a
good or the firm decides to produce more). As a result, the price falls and forces
firms to produce less due to it being less profitable. As the same time, consumers
will buy more and the price will continue to fall until the surplus is eliminated.
On the other side, a shortage would cause a rise in prices. With a shortage, demand
is greater than supply whereby consumers desire more of a good than is currently
being produced. The rise in price would be incentive for firms to produce more
seeing that it is more profitable and consumers to buy less. The rise will continue to
occur until the shortage is eliminated.
It is because of this price mechanism that it is often said that the free market
system is best for allocating resources. I am in agreement with this position.

I currently live in Antigua and we have a mixed economy. Essentially, there is a


combination of both public and private sectors operating coherently. Most economic
decisions are made by the market, with the government playing a vital role and
intervening when necessary.
There are four main market structures. Perfect competition is a market structure
that can be categorized by large number firms with a homogeneous product. There
is free entry and exit into the industry and market information is readily available to
all participants. A monopoly is a market structure where there is one firm selling a
highly differentiated product, with significant barriers to entry to the market.
Monopolistic competition is a market structure quite similar to perfect competition,
with the major difference attributing to the existence of a differentiated product. An
oligopoly is a market structure where the small number of firms present makes it so
that the actions of one will most likely have an impact on the performance of other
firms in the industry (McGuigan, Moyer and Harris, 2011).

References
Sloman, J. (2006) Economics. 6th edn. England: Pearson Education Limited
McGuigan, M, Moyer, R and Harris, F. (2011) Managerial Economics Applications,
Strategy, and Tactics. 12th edn. Ohio: South-Western Cengage Learning

Indirect Taxes and Price Elasticity of Demand


forum
Why do governments tax petrol, alcohol and cigarettes so much in developed regions of the world
such as the United States and in the European Union?
Are these products taxed very much in your country?

One reason why governments tax petrol, alcohol and cigarettes is to generate
revenue in support of the economy. These are indirect taxes passed on to the
consumer and collected by an intermediary who then remits it to the government.
Another reason why governments could impose taxes on alcohol and cigarettes is to
discourage their use by members of the society. With taxes, the price of the product
increases to the consumer and such demand falls. Governments have a
responsibility to ensure the well-being of the country and its citizens. The dangers of
cigarettes and alcohol are widely known, and this is a method governments could
use to discourage their use.
In Antigua, we do not have a separate tax on these products. However, there is a
value added tax placed on most goods. The introduction of these taxes has been
mentioned in cabinet on numerous occasions, but an actual act has yet to be
passed.

Price of Oil Discussion Forum


We often hear people talking about the price of oil. Oil prices are also discussed on news programs
and in newspapers. Some countries have to import all the oil that they need to satisfy their demand,
others produce some oil but still need to import additional amounts from other countries. There are
also other countries that produce enough oil to satisfy their own country's demand and also export to
other countries.
1. Does your country export and/or import oil?
2.Using demand and supply analysis, explain what factors you think affect the price of oil.
3. Why is the price of oil such an important matter?
Please post your answers to the above questions and also try to comment on at least one of your
classmates' postings.

Market Structure Discussion Forum


Having watched the videos and completed your readings you should now be familiar with the
concept of market structure. You have learned about 4 market structures. Having in mind the
characteristics of each market structure, identify 3 different markets/industries in your country that
you believe fit the characteristics of (a) monopoly, (b) oligopoly, and (c) monopolistic competition.
Briefly justify your categorization/classification.

A monopoly is a market structure where there is one firm selling a highly


differentiated product, with significant barriers to entry to the market. In Antigua,
the utilities industry, in particular electricity, exhibits the traits of this market
structure. There is a single government owned institution, Antigua Public Utilities
Authority, who is the sole supplier of electricity.
An oligopoly is a market structure where the small number of firms present makes it
so that the actions of one will most likely have an impact on the performance of
other firms in the industry. The telecommunication industry in Antigua has 3
suppliers who all operate within the market. They use branding and advertising to
differentiate and push their service to consumers.
Monopolistic competition is a market structure quite similar to perfect competition,
with the major difference attributing to the existence of a differentiated product. An
example of this in Antigua would be the restaurants on island. While they all sell
food, each one is different and possesses something unique as they all compete for
the same customers.

Macroeconomy Discussion Forum


In this forum, you are required to state the unemployment rate and inflation rate for your country.
Remember to state the name of your country and to identify the source of your information. You
should then click on your classmates' postings to see how your economy is performing compared to
other countries.

Euro Discussion Forum


A number of countries in the European Union (EU) have adopted the Euro as their currency.
1. Do you think that this was a good idea?
2. Do you think that the current debt crisis in certain EU countries such as Greece, Italy, Portugal,
Ireland and Cyprus may result in a collapse of the Euro?
3. Do you think that any of these countries will end up dropping the euro as their currency?

Central Bank Discussion Forum


Central Banks are responsible for implementing the monetary policy. In countries where Central
Banks are independent of the government, they also formulate monetary policy.
Identify the name of your country and the name of your country's Central Bank.
1. Is your country's Central Bank independent of the government? That is, does the governor of
the Central Bank have the freedom and independence to formulate and implement monetary
policy as it sees right or must it follow the directions of your country's president or prime
minister?
2. Briefly explain whether you agree with the view that Central Banks should be independent of
the government control?

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