a. Define economic system
b. Distinguish between a capitalist economy and a socialist economy under the following:
i. aim of production
ii. consumer sovereignty
iii. competition
c. State three features of land as a factor of production
Explanation
a. An economic system refers to the structure and organization of production, distribution, and consumption of goods and services within a society.
bi.
In a capitalist economy, the primary aim of production is to generate profit. Private individuals and businesses own and control the means of production, such as factories and businesses, and their main objective is to maximize their profits and wealth accumulation.
In a socialist economy, the aim of production is often centered around meeting the needs of society as a whole. The state or collective ownership controls the means of production, and the focus is on providing goods and services that benefit the entire population rather than solely pursuing individual profits.
bii.
In a capitalist economy, consumer sovereignty is a fundamental principle. Consumers have the freedom to choose and influence what goods and services are produced through their purchasing decisions. Businesses respond to consumer demand and complete to attract customers by offering products and services that cater to their preferences.
In a socialist economy, consumer sovereignty is typically more limited. The state or central planning authority often determines the production and distribution of goods and services based on collective interests and social priorities. While consumers still have access to goods and services, their choices may be constrained or influenced by the state's decision-making processes.
biii.
In a capitalist economy, competition plays a crucial role. Multiple private individuals and businesses operate within the market, striving to gain a competitive edge and maximize their profits. Competition fosters innovation, efficiency, and productivity, as businesses seek to attract customers and outperform their lives.
In a socialist economy, competition is less prevalent in a socialist economy, particularly in sectors where state ownership and central planning dominate. The priority is on cooperation and collective goals rather than competition among businesses. Some socialist economies may still allow limited competition in certain areas to spur innovation and efficiency.
c.
- land is fixed in supply
- Land is immobile
- land is heterogenous in nature
- land is subject to diminishing returns
- Land has no cost of production