Business Studies
Chapter 1: economic systems
The Economic System
- How decisions are made with regard - What are the three economic issues:
to:
• WHAT is being produced?
• How Factors Of Production are
• HOW is production taking place?
organised in order to produce and
distribute goods and services • For WHO is it being produced?
- What are the Factors of Production:
• Capital
• Land
• Labour
• Entrepreneurship
Three Basic Economic Systems:
• Planned Economic Systems
• Mixed Market System
• Free Market System
- Planned Economic Systems
• Economic activities organised by - WHO? Government decides who
the Government receives products/services
• Focus on what the government • Advantages:
needs
- Theoretically no unemployment
• Three economic issues: (government employs all citizens)
- WHAT? Only what the - Ensures all citizens have access
government approves to essential services
- HOW? Government decides
quantity needed or services
provided
1
, • Disadvantages: • Eg: North Korea & Cuba
- Consumers (citizens) very low on
list of priorities
- Limited choices of products
- Low drive to preserve resources
as they are owned by
government not people
- Prices are controlled/set by
government
- Free Market Systems
• Economic activities depend on • Disadvantages:
supply and demand
- Unfair distribution of wealth (rich
• No government intervention get richer concept)
• Economic issues: - Monopolies formed often (one
supplier of everything) = higher
- WHAT? All produces required
prices and no drive to improve
- HOW? Competing businesses quality
decide on amount and quality
- Little motivation for public
- WHO? For people who are able services
to a ord it - Job loss due to bankruptcy of
• Advantages: businesses
- Opportunity to work hard and
become successful
- Entrepreneurship is strong and
ensure competition
- Competition = lowered prices
with maintained quality
- Variety of products
- Resources are privately owned
(therefore looked after)
- Mixed Market System
• Combination of planned and free • Some control by supply and
systems demand and some control by
government
2
ff
, • Most countries (eg. South Africa) • Advantages:
• Economic issues: - Social services provided by
government
- WHAT? Combination of what
people want and what - Government creates jobs
government thinks they need
- Combo of advantages from
- HOW? Government and planned and free systems
entrepreneurs decide
• Disadvantages:
- WHO? Government and private
- Public sector is bureaucratic =
sectors taken into account
poor service delivery
- Combo of disadvantages from
planned and free
The Global Economy of Globalisation
• International trade of goods and services
• Advantages of globalisation:
- Businesses compete internationally
- Wider variety of goods and services
- Freedom to work in other parts of the world
- Capital can move between countries
• Rich countries (1st world) get richer & poor countries (3rd world) get poorer
• Advantages for First world countries:
- Develop products from raw materials from Third World countries
- Sell back to Third World countries at higher prices
- Governments can a ord to subsidise industries = manufacture products at
lower cost
- Unemployment in Third World countries = limited productivity
3
ff
Chapter 1: economic systems
The Economic System
- How decisions are made with regard - What are the three economic issues:
to:
• WHAT is being produced?
• How Factors Of Production are
• HOW is production taking place?
organised in order to produce and
distribute goods and services • For WHO is it being produced?
- What are the Factors of Production:
• Capital
• Land
• Labour
• Entrepreneurship
Three Basic Economic Systems:
• Planned Economic Systems
• Mixed Market System
• Free Market System
- Planned Economic Systems
• Economic activities organised by - WHO? Government decides who
the Government receives products/services
• Focus on what the government • Advantages:
needs
- Theoretically no unemployment
• Three economic issues: (government employs all citizens)
- WHAT? Only what the - Ensures all citizens have access
government approves to essential services
- HOW? Government decides
quantity needed or services
provided
1
, • Disadvantages: • Eg: North Korea & Cuba
- Consumers (citizens) very low on
list of priorities
- Limited choices of products
- Low drive to preserve resources
as they are owned by
government not people
- Prices are controlled/set by
government
- Free Market Systems
• Economic activities depend on • Disadvantages:
supply and demand
- Unfair distribution of wealth (rich
• No government intervention get richer concept)
• Economic issues: - Monopolies formed often (one
supplier of everything) = higher
- WHAT? All produces required
prices and no drive to improve
- HOW? Competing businesses quality
decide on amount and quality
- Little motivation for public
- WHO? For people who are able services
to a ord it - Job loss due to bankruptcy of
• Advantages: businesses
- Opportunity to work hard and
become successful
- Entrepreneurship is strong and
ensure competition
- Competition = lowered prices
with maintained quality
- Variety of products
- Resources are privately owned
(therefore looked after)
- Mixed Market System
• Combination of planned and free • Some control by supply and
systems demand and some control by
government
2
ff
, • Most countries (eg. South Africa) • Advantages:
• Economic issues: - Social services provided by
government
- WHAT? Combination of what
people want and what - Government creates jobs
government thinks they need
- Combo of advantages from
- HOW? Government and planned and free systems
entrepreneurs decide
• Disadvantages:
- WHO? Government and private
- Public sector is bureaucratic =
sectors taken into account
poor service delivery
- Combo of disadvantages from
planned and free
The Global Economy of Globalisation
• International trade of goods and services
• Advantages of globalisation:
- Businesses compete internationally
- Wider variety of goods and services
- Freedom to work in other parts of the world
- Capital can move between countries
• Rich countries (1st world) get richer & poor countries (3rd world) get poorer
• Advantages for First world countries:
- Develop products from raw materials from Third World countries
- Sell back to Third World countries at higher prices
- Governments can a ord to subsidise industries = manufacture products at
lower cost
- Unemployment in Third World countries = limited productivity
3
ff
