Objective 4- Discuss the impact of these economic systems on a business decision making.

Market( free, capitalism) economic system

The market mechanism (demand and supply) automatically allocates resources. As a result, as
demand increases, more factors of production will be utilized and more rewards will be earned.
Firms face stiff competition and so they are forced to be efficient and innovative. Businesses will
take the necessary steps to minimize costs.
Some businesses become culprits in environmental degradation, since government intervention
may be limited.
This system promotes the entrepreneurial spirit, as people are free to start businesses.

Planned (command) economic system

The entrepreneurial spirit is dampened, as resources are owned and utilised by the government.
Businesses are generally government owned and their production targets are based on need rather
than profits.
Central planners will guide businesses to produce standardised products – thus there is little, if
any, variety.
This type of system promotes the development of the ‘black market’ or underground economy, as
people find other means of getting products sometimes not produced by the government or in
insufficient quantities.

Mixed economic system

This system is gleaned from the two preceding systems and its impact will be a mixture of both.