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Economic System. Economic Factors The following factors constitute economic environment of business- Economic Systems- Types of Economies- 1.Capitalist.

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Presentation on theme: "Economic System. Economic Factors The following factors constitute economic environment of business- Economic Systems- Types of Economies- 1.Capitalist."— Presentation transcript:

1 Economic System

2 Economic Factors The following factors constitute economic environment of business- Economic Systems- Types of Economies- 1.Capitalist Economy Capitalism is system of economic organization featured by the private ownership and use for the private profit of man made and nature made capital Ex- USA, China etc

3 Economic Factors Characteristics of Capitalist Economy- 1.Freedom of Enterprise 2.Private ownership 3.Profit Motive 4.Consumer Sovereignty 5.Competition 6.Freedom of Contracts 7.Limited role of Govt.

4 Economic Factors 2Socialist Economy Socialism is an economic system where the means of production are either owned or managed by the state and where the investment structure, consumption, allocation of resources, distribution of income etc are regulated and directed by the state. Ex-Cuba & North Korea etc Characteristics of Socialist Economy- 1.Equitable distribution of Income 2.Government Ownership 3.Uniform Plan of Action

5 Economic Factors III.Mixed Economy- In mixed economy there is policy of compromise between capitalist and socialist economic system. The main important characteristic of a mixed economy the existence of both private and public sectors. Government and individuals share the decision making process Government guides and regulates production of goods and services offered. Protection to consumers and workers from unfair policies Ex-India

6 DIFFERENCE BASISCAPITALISMSOCIALISMMIXED OwnershipPrivateGovernmentBoth CompetitionHighNoLow Price determinationMarket mechanism AdministeredBoth MotiveProfitSocial welfareBoth NatureRigid Flexible Government interferenceNilDominantSelective and effective Consumer freedomPresentAbsentPresent Exploitation of labourProneAntiProne NatureDemocraticAutocraticDemocratic Guarantee of developmentNo Growth led byPrivate sectorPublic sectorBoth 6


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