Market Economy: “Economic system in which the majority of a nation’s land, factories, and other economic resources are privately owned, either by individuals or businesses

Market Economy

An international business must understand the economic system embraced by the host country and its implications. Moreover, there are powerful economic arguments in support of international trade and they provide a useful perspective on international business.Research economic systems using your textbook, Argosy University online library resources, and the Internet. Respond to the following:

  • Which economic systems would be most suitable for a country: centrally planned, mixed economy, or market economy?  Since Canada is the #1 trading partner with the USA, focus specifically on Canada. Research Canada’s mixed economy and comparing it to the American economy covering any comparative advantages of Canada. State any assumptions you make and give reasons for your position.

STUDENT RESPONSE:

 

Which economic systems would be most suitable for a country: centrally planned, mixed economy, or market economy?  Since Canada is the #1 trading partner with the USA, focus specifically on Canada. Research Canada’s mixed economy and comparing it to the American economy covering any comparative advantages of Canada. State any assumptions you make and give reasons for your position.

Centrally Planned Economy: “Economic system in which a nation’s land, factories, and other economic resources are owned by the government, which plans nearly all economic activity” (Wild, 2016, p. 81).

Mixed Economy: “Economic system in which land, factories, and other economic resources are rather equally split between private and government ownership” (Wild, 2016, p. 82).

Market Economy: “Economic system in which the majority of a nation’s land, factories, and other economic resources are privately owned, either by individuals or businesses” (Wild, 2016, p. 83).

Living in the United States, I would say that a Market Economy is the most suitable for any country; if I did not believe this I would not continue to live here.  A Market Economy depends on the laws of supply and demand. Supply and demand are determined by a countries ability to produce, their resources, and their ability to convert these resources into goods. This type of economy has a much more competitive market and the choice to produce certain goods and services is determined by private owners and not the government.  Their decisions are driven by profit and profit is driven by supply and demand.  This type of economy is driven by self-interest; buyers want to purchase goods at the lowest prices and sellers want to sell at the highest price possible.  There is a lot more competition and there are a lot more choices.  Greater choices in goods is a major benefit in a Market Economy; if there is a demand for a certain good, there is a producer willing to sell it.  This type of economy also creates greater efficiency of resources; because profits determine what is produced and only efficient producers survive the competition.  Another major benefit to a Market Economy is innovation; because only the most efficient producers survive this drives the needs for newer and better ways of doing things.  Competition in this economy also increases quality; again higher quality means greater demand.

I do agree that there are some aspects of Canada’s Mixed Economy that we would benefit from.  There are great advantages for a country when their government safeguards their economy, which in turn protects the consumer (i.e. the citizens).  According to Amadeo (2018) a Mixed Economy focuses a lot more on the citizens’ needs compared to other economic systems.  “These include aerospace, energy production and even banking. The government may also manage health carewelfare and retirement programs” (para. 6).  A Mixed Economy like Canada’s allocates funds and resources to the most efficient producers; this generates greater goods at lower prices for their citizens.  This type of economy also focuses and allocates a lot more of their resources toward areas of the country that could be ignored or neglected in a Market Economy; areas like technology and aerospace.

Reference:

Amadeo, K. (2018). Market economy, its characteristics, pros, cons, with examples. Retrieved from the Balance website: https://www.thebalance.com/market-economy-characteristics-examples-pros-cons-3305586

Amadeo, K. (2018). Mixed economy, its characteristics, pros, cons, with examples. Retrieved from the Balance website: https://www.thebalance.com/market-economy-characteristics-examples-pros-cons-3305586

Wild, J. J. (2016). International Business: The Challenges of Globalization, 8th Edition. [Argosy University]. Retrieved from https://digitalbookshelf.argosy.edu/#/books/9781323424698/.

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