Functions of economic system

  • What to produce? variety of good and services that can be produced by an economy every economic system keeping in consideration the requirement of its people has to decide whether it has to produce more of consumer good or capital goods the resources available with a system are squares large quantity of all good cannot be produced simultaneously
  • how to produce? an economic system has also to make a choice of a suitable technique of production for example cloth can be produced by automatic plant or buy Handloom unit agriculture produce can be produced by employing more of labour or machines the choice of technique depend upon the availability of resources are thickly populated economy was normal make a choice in favour of labour intensive technique of production on the contrary and advanced economy make a choice or favour of capital intensive technique
  • for whom to produce?  Dispersion of economic system is related to the problem of distribution and economic system is the expected to satisfy the need of all people of the country forever in our capitalistic system could have produced for those who have the purchasing power to cure them on the other hand in a socialist economic system who are produced and distributed according to the need of the people
  • choice between present and the future: there are certain want which need immediate satisfaction whereas other want may be postponed for the future and economic system has to make a rational allocation of resources between the present and the future tense and economic system has the perennial existence it has to strike a balance between the present and the future it has also to preserve the economic environment free from all kind of pollution to serve the interest of both the present and the future generation
  • economic growth: an economic system has not only to utilise its existing resources but also to discover new resources and exploit them to accelerate the rate of economic growth through the development of new technique and economic and attain high productivity and ensure high standard of living. 
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