Economic Systems

Business Environment
Assignment 2
By William Patten

2.1 Government Influences
In this section I will explain how free enterprise and transitional economic systems attempt to allocate resources effectively and give examples of countries that use them and the impact on the economy.

Free Enterprise
Economics online state that free enterprise is “Markets enable mutually beneficial exchange between producers and consumers, and systems that rely on markets to solve the economic problem are called market economies” below is my explanation of Free enterprise.
Free enterprise allows the consumers to determine what is in demand and therefore more or less will be made by the producers, this is called purchasing power and is held by consumers. Free enterprise allows the producers to make their products without influence from outside parties like the government, like a command economy would, it also allows the producers of the product are free to work with any company and this to both parties to get the best price for the items and therefore make a higher profit margin.

Free enterprise has been brought forward by a theory by Adam smith`s brought forward by invisible hand of market and is a means to explain the reasons behind   a free market and why it is beneficial , although the theory is over 200 years old and the theory itself is very direct at the people behind a free market, I also concur it was created in 1776 but the principles behind the theory are still valued, he states that “It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” This means in terms of a free enterprise that the people and businesses that use free enterprise system don’t question it, rather take advantage of the...