Understanding Economic Systems and Global Markets
Classified in Economy
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The Economy
People produce products and services to satisfy their needs and wants. Natural, human, and capital resources are used to produce economic goods.
Economic Systems
An economic system is the way in which a society organizes its economy. Types include socialist, centralized, and market economies.
Market Economy
In a market economy, people and companies produce, buy, and sell goods and services freely with only limited involvement by the state. Price is determined by supply:
- If the supply of a product is high, the price goes down.
- If the supply is low, the price goes high.
Economic Agents
- Families: Not necessarily a group of related people; can consist of one or several individuals. They consume goods and services and contribute to the factors of production.
- Companies: Organizations that produce goods and services offered in the market.
- The State: Intervenes in the economy in various ways, such as offering public services.
The Labour Market
Workers are the human resources of a company. In a capitalist economy, most workers are subject to market laws.
Changes in the Labour Market
- Unemployment: Has increased in many parts of the world.
- ICT: Has revolutionized production methods.
- Workforce: Workers are becoming more qualified, though inequalities between men and women persist.
- Flexibility: Companies can dismiss employees and employ others, while working conditions have generally improved.
The Globalisation of the Economy
ICT allows companies worldwide to connect, creating a global market. The expansion of multinationals and the relocation of production centers have led companies to globalize their production processes.
International Trade Blocks
- Free Trade Zones: Remove tariffs on products bought from other member countries.
- Common Market: Removes tariffs and allows the free movement of people and capital between member countries.
The globalization of the economy is supported by international organizations that promote free trade between members.