Economics for Business and Management Essay Example | Topics and Well Written Essays - 2750 words

Economics for Business and Management - Essay Example Therefore, the invisible hand is that process where while an individual is pursuing self interest, he/she promotes the overall societal welfare but not intentionally. On the contrary, Smith says that he had never in his lifetime known the goodness of the persons who involved in trade to achieve the main goal of the public welfare. In his book â€Å"The Wealth Of Nations† Smith has only one stand, that the invisible hand is the prime determinant of the public welfare. (Suntum, 2005 pp1-5) Command and Mixed Economies A command economy, which is also referred to as a planned economy, is one which has the state regulating resources. The state is the decision maker to come up with the allocation or utilization decisions of the available resources. It uses the services of certified planners who are just below the state in power to implement these decisions. (economicwatch.com, 2011) A command type of economy is not without merits and demerits alike. The merits of a command economy m ay include the main fact that they ensure that collective interests for the public good are maximized. Also governments which do their operations under this type of economy are able to mobilize as well as respond swiftly to raise capital and commence the process of production if need arises. (businessspan.com, 2011) The demerits associated with a command economy are the likes of the denial of sovereignty for individuals as regards the expression, working, earning and making expenditure choices. It as well assumes that people should be fully committed to work and they should aim at overall national welfare. There is the demerit of slowness in ensuring economic growth unlike the capitalist type of economy. Equality does not thrive in a communist economy since there is stratification. Lastly, there is lack of flexibility when it comes to moving from one decision to another for the welfare of the public. On the other hand, a mixed market involves a blending of the two major types of eco nomy. That is, a command and a market type of economy. This is mostly the kind of approach by Italy, India, France and Sweden. Here, there is the government controlling of resources and the private sector. There are sectors in which distribution as well as production is under the state’s management. Sectors which have both the state and the private sector jointly involving in production and distribution and the sectors under which private control is in entirety. (Aswathappa, 2008 pp269,270) A mixed economy may be characterized by several advantages. Some of the advantages of a mixed economy are with the inclusion of the good regulation of prices in the market. Here, the state always ensures that prices do not soar above actual prices. It as well provides a level playground since there are private sectors involved in the market without compromising on the quality of commodities in the market. Natural resources are also optimally utilized due to there being the government and t he private sector being involved in the allocation. People in a mixed economy have ample power when prices and quality of commodities is put into consideration. Monopoly cannot also thrive in a mixed economy as both the private enterprises and the government gets their hands in every business. (benefitsandadvantages.com, 2010) Critics state that a mixed economy is not the best type of