CASE STUDY



Case Study

Case Study

Economics

Economics is basically the study of wealth of a nation as it is described by Alfred Marshal. However, the process the term entails covers commodity production using scare resources. Or it can be said that the allocation of scare resources which have alternative uses. Numbers of methods are being employed to allocate various resources as per the vary situations of national economy. However, national economy can also be broken down in to two different types which include:

Free Market Economy

Centrally Planned Economy

Free Market Economy

Economic system based on the free play of market forces. Through the information that the price system operators are adjusting their supply and demand and making decisions on production, consumption, savings and investment, to optimize scarce resources. Obtain the benefit indicates the efficacy in this setting. The State does not plan or direct economic activity, but it creates the legal certainty necessary for individuals to exercise freely.

According to the main features of free market economy, only specific group of people who have control and access over wealth and resources have the privilege to buy goods & services, whereas, in an free market economy the prices of commodities are often higher. Prices are the only distributing & allocating components in a free market economy through out the poor from the system as they don't have accessibility over resources and wealth. (Smith, 2008, 101-105)

Hence this approach is considered completely imperative, especially in countries like Brazil, India, Peru and some other Latin American Countries, whose most of population is poor, and the countries have installed a public distribution system which offers subsidy on various commodities of basic needs. However, free market economy is considered one of the most effective and efficient approach, as it can properly allocate the resources and wealth of a nation. This type of economy is often linked with Capitalistic type of economy which argues that production in any economy should completely be owned privately. (Altvater, 1993, 57)

On the contrary, Socialistic Economies or totalitarian economies like the erstwhile North Korea, China and USSR, until now, have an entirely government operated function. This means that the prices of products and services are completely under control of government. (Myers, 2004, 288)

Planned Economy

Planned economy refers to the economic system based on central planning. In a planned economy the most important decisions are taken by a collective body of officials who allocate resources and set targets for each sector and branch of production, according to general goals laid out previously. Market forces meet, therefore, a little or almost no role.

Free Market Economy vs. Centrally Planned Economy

• The basic necessities in a centrally planned economy are intended to be made accessible to everybody at reasonable price & there is social equality and security.

• In free market economy the main advantage is that the commodities that are being produced are those which are required and the limited resources are being used to meet the demand of consumers.

There are also weaknesses linked with both types of economic ...