Understanding Economic Systems and Business Structures

Economics notes The term "economic system" refers to the structure and process a country uses to allocate its resources and do business. • Just as every culture shows a mix of individuals and groups, every business shows a mix of individuals and groups. • Depending on the level of state and private ownership in the economy, we can classifyas (1) central economy, (2) mixed economy, or (3) enterprise. • We can horizontally arrange the country's economy according to their needs for personal or common economic interests. • On the left side of Map , we see the extreme communist countries Cuba and North Korea, and on the right side, we see the United States of America. In central economic planning, the government owns most of the financial resources and organizes almost all economic activities. • The ultimate goal is to achieve political, social and economic goals that focus on the welfare of the group rather than the welfare of the individual. • Central planning dominated Eastern Europe, Asia, Africa and Latin America in the 1970s United States. However, countries that relied on centralized control of their economies failed to achieve their goals. Specifically: • They failed to create business results by failing to produce good products. • Lack of incentives to maximize resource use slows economic growth and lowers living standards. • The economy could not grow rapidly and fell behind other countries. • Failure to meet customer requirements, even for critical equipment. China defines its economy as a "culture with Chinese characteristics". • China converted to Christianity in 1949, but in 1979 allowed families to grow what they wanted and sell their produce cheaply. • Then, in 1984, TVEs were legalized and the foundation for businesses was laid. In business, individual interests are higher than group interests. • In other words, when people are rewarded for their self-interest , the whole group is said to benefit. • Economy based on the principles of laissez-faire economics,

French "let them do their job [without interference]". • The three main elements of marketing are: • Free choice that gives people an alternative way to buy things. • Free trade means companies decide what to produce and where to compete . • Flexible pricing that allows most prices to rise and fall based on the strength of supply and demand. In business, the government has four main responsibilities: • enforcing competition laws • protecting legal rights • providing financial security and financing a tour • And controlling security control controlling trust protection (antitrust) law. • This encourages business growth with many competing companies and avoids business constraints that could drive up prices and exploit customers. The state should protect property rights in commercial transactions. • A powerful way to protect rights to enable individuals and businesses to take advantage of their work. • In other words, encourages individuals and companies to create and invest in new technologies because their efforts are rewarded with revenue from the technology created. • It also encourages entrepreneurs to start new businesses as it protects their asset rights .