Introduction of economic system

Economic refers to the organization of production distribution and consumption of good

and services within the society. It regulate the factors such as production, land, capital
labor and physical resources. There are generally different types of economic systems
such as capitalism , socialism, market, mixed economies etc. , each systems
determines how resources are allocated , how production is organized and how goods
and services are distributed based on the structure set by the government and market
forces. However these systems can have a significant impact on the factors of income
distribution within the society. The purpose of economic system is the core function
which is to preserve people’s ways of life by figuring out the best ways to distribute
goods and services based on the available skills and resources. The societal impacts
affect how the government regulates ownership , taxation and marketing decisions also
in capitalist systems it increases prosperity and improves living standards which results
to social and economic inequality for an example mixed economic can take on all the
disadvantages of the other types of economies such as if the market has too much
freedom, it can leave the less competitive members of the society without government
support and also the central planning of government industries creates problems by
becoming a subsidized government which results to the increase of country debt and
economic growth in the long run. The advantages of economic systems can lead to
resource allocation where by the economic system can help to efficiently allocate
resources and determine the distribution of goods and services in the economy and
also increase economic growth through investment , innovation and the efficient
allocation of resources , increasing overall the prosperity and the wellbeing. The
function of economic system has played a major role in the economic systems in the
distribution of income and wealth by determining how income and wealth are distributed
among individuals or groups in the society through various mechanism such as wages,
profits, taxes, and welfare programs (granovetter, 2005). However the following will be
identifying and explaining the economic system that is applicable in the case study.

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 Differentiation of economic system

A capitalism economic system is a system of economic in which production, distribution

and exchange of goods and services are privately owned and operated by profit. It is
also often thought of as an economic systems in which private actors own and control
property according to their interest demands and supply. The essential features of
capitalism is the motive to make profit (smith, 1819).the most important feature of
capitalism is the existence of private property, however everyone has freedom to form
any firm anywhere he or she likes but he or she needs to provide a requisite capital and
ability. It is based on the doctrine of laissez faire which could mean that the state
interference in a bare minimum. The aim is to create economic growth and improve the
standards of living. The purpose of capitalism economic system is promote efficient
allocation of resources in a way that efficiently produces goods and services to meet the
needs and desires of consumers and individual freedom and autonomy it support
individual freedoms and rights to own property to start a business and pursue economic
opportunities according to one’s choice. The significant role of money or profit lies in the
functioning of the price mechanism which is the central problem of capitalist economy
as to what to do, how much, how and for whom produce are solved through the price
mechanism. The price mechanism also helps individuals to arrive to correct decisions
regarding saving and spending. (marx, 1917). The function of capitalism shares with
other forms of economy systems such as society, which promote competition, efficiency
and innovation in the market place.it is based on the principles of private ownership
with the of production ,where individuals and businesses van sell freely and trend goods
and services freely. Through this systems resources are allocated through different
exchanges allowing businesses to respond to meet consumers demand and market
signals. Capitalism also encourages comic growth by rewarding innovation and
entrepreneurships which results to high productivity job creation and overall the
prosperity of the society.

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 Advantages of capitalism economic system

 It encourages efficient production: mixed –market capitalism rewards are the

most efficient producers since they sell more goods and earn more money and
then inefficient producers. Companies strive to be reliable suppliers for
consumers leading to large scale availability of products to meet growing or high
demands.

 It facilitates rapid economic growth: limited government intervention

encourages producers and consumers to accumulate wealth by offering their
service to as many parties as they can.

 It rewards innovation: capitalism provides incentives for economic growth such

as exciting new products which may satisfy consumer demands better than
existing product and competitors will recognize that they can increase their profit
by producing an innovative product.

 It offers social and financial freedom: capitalist and societies allows to choose
their own occupations to earn money and have the freedom to choose where
they can invest or spend their money to pursue a higher standard of living. A
competitive market economies encourage successful businesses to invest in up
and coming companies it increases the quality of production.

 Job creation: capitalism encourages entrepreneurship and investment leading

to the creation of new businesses that can provide job opportunities and
strengthen the economy.

 Innovation and technological: capitalism promotes innovation and

technological advancements as companies compete to create better products
and services to attract customers. To create better products and services to
attract consumers.

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Capitalism has number of potential disadvantages as an economic systems such
as:

 It pressures production: capitalism is highly driven by competition so

companies may be pressured to produce goods and services at a faster
speed that may reward quantity over quality. This can sometimes lead to
businesses reducing the factors of production for example opting for lower
quality raw materials or rushing jobs. Instead of focusing on producing the
best product as possible.

 Limits of economic checks and balance: capitalism intends to encourage

competition but the limited checks and balances on economic growth can
backfire to discourage it. For example if the company becomes a monopoly
they can hold exclusive powers per a particular sector and be able to
manipulates the market. (henry, 2021).

 Limits of equal opportunity: in a capitalism market economy is there for

mechanism to help those who are disadvantaged such as elderly or people
with disabilities. For example caretakers are also the ones who are
disadvantage as they allocate their time and resources towards caretaking
instead of pursuing a better opportunity for profit.

 Disruption of community: the quest of growth and expansion in a capitalist

system can result indestrucive practices that disrupt local communities and
cultures. For example the opening of large corporation businesses can lead
to the decline of locally owned businesses and the loss of the community
identity.

 Limited social mobility: capitalism can create barriers to social mobility with
assets and opportunities primarily accessible to those who are already well
off. However this perpetuates leads to societal inequalities and limit the other
individuals who are from disadvantaged backgrounds to thrive and improve
their circumstances.

 Focus on the material goods: capitalism can promote materialism and

consumerism, leading people to measure success by their material wealth
and possessions rather than personal fulfillment and wellbeing. This can have
negative impacts on mental health social relationships and overall happiness

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 Reason of answers

The applicable economic system is capitalism economic systems the reason I support
my statement it because in the case study is it stated that “William Company is a south
African based management consulting firm. Which is a private ownership company.
”members of the company acquire more assets and make profit through the productive
utilization of their assets or their capital” and the main motive of capitalism economic
system is operation of profits. “The CEO of WC does not own land, factors or equipment
on this company.” In the capitalism economic system everyone has a freedom to form
any firm anywhere he likes

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 Conclusion

In conclusion capitalism has proven to be an efficient and innovative economic system

that promotes competition, productivity, and innovation. It allows individual economic
freedom. However it has its drawbacks such as income inequality, environmental
deration and lack of social safety. Whereas the Maslow’s hierarchy of needs should
ensure that it pays attention each individual’s circumstances and unique needs
providing resources support and opportunities for each and every one by reaching all
the levels of the hierarchy. Collaboration with social workers, counselors and health
services to address any barriers to meeting all the needs can that it can be effective.

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 Maslow’s hierarchy of needs

Maslow’s hierarchy of needs is a psychological theory about what drives human

behavior and what human feel fulfilled. It represent five key human needs that people
must meet to order to achieve well-being such as physiological needs, safety, love and
belonging, esteem, self- actualization. This means that if a person is struggling to meet
their physiological needs they are unwilling to seek safety belonging esteem and self-
actualization on their own.

 Physiological needs: I would provide the basic needs of individuals such as

water, shelter, and healthcare in my company.

 Safety needs: I would ensure that each employee has a safe and secure
environment including access to security, stability and protection from any harm
in the work place.

 Love and belongingness needs: I will try to foster connections and

relationships with my employees such as building broken bonds with family
members, encourage support, friendships and love in the company.

 Esteem needs: I will encourage my employees to recognize and value each

individuals for their accomplishments and abilities, I will provide opportunities for
each individuals so that they can be able to grow and achieve more goals.

 Self-actualization needs; I will encourage support individuals in pursuing their

personal goals, passions and potential for their personal fulfillment and growth.

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