REVI

EW OFSSC102NOTEFROM THEBEGI
NNI
NGTI
LLDATE

THENATUREOF ECONOMI
CS

Thenatur
eofeconomicsisref
lect
edini
tsdefi
nit
ion.Hencethedef
ini
ti
onofeconomicsisour
st
art
ingpoint
.Economicshasbeendefi
nedvar
iouslybyseveral
aut
horsandthedef
init
ionscan
bebroadl
ydivi
dedint
otwo:

1.Weal
thbaseddef
ini
ti
on/
Wel
far
e

2.Scar
cit
ybaseddef
ini
ti
on

WEALTHBASED

I
tisr
elat
edt
oweal
thandmat
eri
albasedneeds.

SCARCI
TYBASED

I
tisrelat
edtoscar
cit
yofmeansi
eRESOURCES.Weal
th/
wel
far
ebasedi
scompr
isedof5
def
init
ions:

ADAMSSMI
TH(
Weal
th/
Wel
far
eBased)

Economi csisanenqui r
yintothenatureandcausesofweal thofnat
ions.Heusedt hi
s
definit
ionasat i
tleofabookpubl i
shedi n1776.Accordingt
oAdamsSmi t
h,Economi csi
saf i
eld
ofst udythatisconcernedwiththefactorsthatdet
erminesthewealt
hofacount r
y.Thefactors
responsiblefortheexpansionofweal t
histhesecondf ocusofAdamsSmi thdefi
nit
ion.I
nthis
heemphasi sproducti
onandexpansi onofweal t
hofacount ry
.

AdamsSmi
thf
ocusar
e:

Det
ermi
ner
sofweal
thofacount
ry.

Det
ermi
ner
sofexpansi
onofweal
thofnat
ion.

AdamsSmi t
hemphasizedproduct
ionandexpansi
onofacountr
y.Theweal
thwespeakofi
s
i
ntheter
msofmat er
ial
wealth.Hi
sthir
dfocusisontheconst
it
uent
sofweal
thwhichdeal
swit
h
t
heoutputofpr
oduct
s(ieproduct
ionofgoodsandservi
ces)
.

Thi
sdefini
ti
onassumeseff
ici
entuseofproduct
ionresour
ces(akafact
orsofproduct
ion,
for
wi
thouti
ttherei
snoexpansi
onofwealth.Theeff
ici
entusewil
ltaket
heform of:

1.Al
l
ocat
iveEf
fi
ciency
2.Pr
oduct
iveEf
fi
ciency

3.Techni
cal
Eff
ici
ency

4.X-Ef
fi
ciency

AdamsSmithdi
dnotconsi
der
edt
heshar
ingordi
str
ibut
ionofr
esour
ces.Hebasi
cal
l
y
emphasi
zedonpr
oduct
ion.

DAVI
DRI
CARDO

Ricar
doshiftedt
heemphasi sonproductionandexpansi
onofwealthtothedistr
ibut
ionof
wealt
h.Hegav ethedefini
ti
onint
hepr efaceofhisbookti
tl
ed"Pri
ncipl
eofPol i
ti
calEconomy".
Hewr ote;t
heproduceoftheeart
h,allt
hatisderiv
edfrom t
hesurf
acebyt heunit
edapplicat
ion
ofthelabourmachiner
ies andcapitali
sdi v
idedamongthreecl
assesoft hecommuni t
y
namely;

ThePropri
etoroftheland,Theowneroft hestocksofcapi
talnecessaryfori
tscul
ti
vat
ionand
Thelabourerbywhosei ndustr
yitiscul
ti
vated.Heconcludedthattodeterminethel
awswhich
regul
atethi
sdi st
ri
buti
oni st
heprinci
palproblem ofpol
it
ical
economy

HelikenedAgri
culturalpr
oducti
ontoAgri
cul
tur
alproduct
sandt heproduceisistheoutput
.He
sai
dtherearecapital
istwhoaretheownerofcapi
talsorst
ocks.Unit
edapplicat
ionisa
combinati
onoffactorsofproducti
on.Al
sothe3classesofcommuni t
yismeasur edinthe
money .Theseclassescamef r
om the'Tot
alVal
ue'whichissharedintoLAND--rent
--
->
CAPITAL--
-i
nter
est--
->SALARIES/WAGES.

Davi
dRicardocontr
ibuti
oni
stofi
ll
int
hegapthatAdamsSmit
hleft
.AdamsSmit
hdoesnot
tal
kaboutdi
stri
but
ionandshari
ng.Ri
car
docameandf i
l
lint
heopt
ionofthr
eegr
oupthatwi
l
l
sharet
henati
onaloutput.

Weneedt otakenotethat
,howthispr
oduct
ionissharedwil
ldeter
minethenatureofthe
societ
y.Thecapit
ali
star
eusuall
yfewerthant
helabourerandtheygetthelar
gestshar
ebutt he
l
abourernormall
ygettheminimum shar
e.Theshari
nghasal otofconsequencesonthenature
ofthesociet
ywehav e.

Thepoli
ti
calcl
assaret
herentcl
ass,t
heyrecei
vedgai
nswheretheydonotsow.Hesai
d
economicsisconcer
nedwit
hthelawthatgover
ndist
ri
buti
onofnati
onalout
put
.

DavidRicar
dosai
d,Economicscanbedefi
nedasthefi
eldofst
udyconcer
nedwitht
he
di
str
ibut
ionofweal
thproducedbytheuni
tedappl
i
cati
onofthefact
orsofpr
oduct
ion.

J.BSAY
Anot
herdef
ini
ti
onbyJ.B SAY,
isaFr
encheconomi
stdef
inedeconomi
csast
hest
udyoft
he
l
awswhichgovernweal
th.

S.
AWal
ker
's

S.AWalker'
sisanAmer
icaeconomi
st,
def
inedeconomi
csast
hebodyofknowl
edgewhi
ch
r
elatetowealt
h.

TWOCRI
TICI
SM OFWEALTHBASEDEFI
NITI
ONOFECONOMI
CS

1.EmphasisonMateri
ali
sm:TheChr
ist
ianr
eli
gionki
ckagainstt
hest
udyofeconomicsbased
onthefactthati
tpr
oposedt
hehopeofMammonr athert
hanencour
agethepursui
tofspi
ri
tual
growt
handheav en.

2.Thewealthbaseddefini
ti
onofeconomi
csr
educedthescopeofeconomi
csbynoti
ncludi
ng
i
mmat er
ial
thingsli
keEDUCATION,GOODADMI NI
STRATION,HEALTH.Yett
hisi
mmateri
al
t
hingsar
eimpor t
antforeconomi
cgrowthwhi
chtheyandexpansi
onofmater
ial
weal
th.

3.Wealthbaseddef ini
ti
onignoredt hepromot i
onofhumanandsoci al
welfarewhichaccor
ding
tosomeschol ar
sar etheulti
mat eobj ect
iveinproduct
ion.Hencewealthbaseddefini
ti
on
i
gnoredthebehav iourofmani nrelationtowealth.Wealthshoul
dnotber egardedasthe
ult
imateai
m ofpr oduction,
inreali
tyt heult
imateendist hewelf
areofmani nthesociet
y.
Wealthisj
ustameanst oachi
ev i
ngt hisobject
ive.

Thewealthbaseddef i
niti
onbyAdamsSmi t
handot herscoul
dev entual
l
ygavewaytoa
welf
arebaseddef i
niti
ongivenbyAl f
redMarshall.I
tshouldbenotedt hatt
heweal
thbased
defi
nit
ionweregivenbycl assicaleconomist.Howev erAlf
redMarshallbel
ongtot
hegroupof
Neoclassi
caleconomi st
.Alfr
edMar shal
lcontri
buti
onst oeconomicswast ol
ayemphasison
manandhi swelfare.Accordinglythedefi
nit
ionisgivingbelow:

Economicsisthestudyofmanki ndi
ntheordinar
ybusinessoflif
e.I
texaminethatpartof
i
ndivi
dualandsocialacti
on,whichmostclosel
yconnectedwi t
htheatt
ainmentandt heuseof
t
hemat eri
alnecessi
tyofwellbeing.Not
ethatthisdef
ini
ti
onseeseconomi csasthest udyof
wealthontheonehandandast hestudyofhumanbehav iourontheotherhand.I
tregardsas
t
hesour ceofhumanwel far
e,thoughwealthi
snotanendt oit
sel
f.

Al
fr
edMar
shal
lsepar
atedeconomi
csf
rom pol
i
ticsunl
i
keDav
idRi
car
do

byusingthet erm economicsrat

herthanpoliti
caleconomicstothedef
ini
ti
on.Int
hisway
Marshal
lelevatedthestudyofeconomi cstotherealm ofsci
encebyremovingpol
i
tical
i
nfl
uencesf r
om theanal y
sisofeconomi cal
issue.
THREETHI
NGSTOBENOTED

1.Economicsisthestudyofman'
sbehavi
ouri
nrel
ati
ontoweal
th.Thi
sshift
edemphasi
sfr
om
thepract
icalper
cepti
onofeconomicsast
hestudyofman'
sacti
on,r
egardi
nghowheearnand
spendweal t
h.

2.Thiseconomicsi
sasocialsci
encebymaki
ngsuret
hateconomi
csst
udi
esmani
nan
or
dinarybusi
nessofl
if
e.Thi
sconnotestwot
hings:

A.Economi
csi
saf
iel
dthatr
elat
etohumansoci
ety
.

B.Economi
caspectofsoci
etyratherthanit
srel
igi
ous,cul
tur
alorpol
i
ticalaspectofthesoci
ety
i
stheconcer
nofeconomics.Thisisev i
denti
nthephrase"or
dinar
ybusinessoflif
e'which
meanshowmanget sandspendhi sincome.

3.Economi
csai
m atpr
omot
ingsoci
alwel
far
e.

Thismeanst hattheendofeconomi csistheat t

ainmentofwel lbeinginthesociet
y.Thi
siswhy
economi csi srelat
edt othoseact i
viti
eswhichpr omot esocialwelf
ar eandexcl
udesocial
ly
undesirableact i
vit
ieslikerobbery,prost
it
ution,corrupt
ion,Advancedf reefr
aud(419),
constit
utional vi
ceset c.Thedef i
nit
ionofeconomi csbyAl f
redMar shallwhi
chmadei twi
dely
acceptablef orlong, i
tsuff
eredt womai ncriti
cism putforwardbyLi onelRobbi
nsin
dist
inguishingEngl isheconomi cs:

1.Economicsisnotlimitedtomateri
al t
hings,shepoi ntedoutt hatMarshall'
sdef i
niti
onl i
kethe
othersbef
orehimv iewedeconomi cshasbeenconcer nedwi ththepossessionofphy sical
propert
yli
kehouse,shi ps,machi
neri
es, vehi
cles,estate,etcforthewell bei
ngoft hepeopl e.
Robbinshoweverpointedoutthateconomi csisconcer nedwi thimmat erial
thingslikeser v
ices,
henceservi
cesli
kedanci ng,si
ngi
ng,teaching,mar keti
ng, bankingetcarealsost udyin
economics.Si
ncetheycommandapr ice.Thuseconomi csi sconcernedwi t
hal lgoodsand
servi
cesprovi
deditcommandapr icewhet hertheyar emat eri
al (
tangi
ble)orimmat eri
al
(int
angibl
e)goods.

2Economi csisconcer nedwi thscar ci

tyandnotwelfare.Economi csist
hestudyofchoice
undertheconditionofchoi ce.Henceanywel f
arebaseddef i
niti
onofeconomi csisi
nappr opr
iat
e.
Thisideaissubjectedbyt hef actthatwelfar
eissubjecti
verangingf r
om per
sont operson,pl
ace
toplacebecauseanobj ecti
v eassessmentofwel farepromotingact i
vi
ti
escannotbeagr eed
upon.Forinstancepricingpr oblem ofgoodslikel
iquorandot hersunvari
edthoughttobe
harmfultosocialwelfarear eincludedineconomics.

Becauseoft
hiscr
it
ici
sm,Robbi
nsscar
cit
ydefini
ti
onofeconomicswasputf
orwar
dinher
booktit
ledanESSAYonthenatur
eandsi
gnifi
canceofeconomicsci
ence.

Accordi
ngl
y,economi
cswasdefinedasasci
encewhi
chst
udieshumanbehav
iourasa
r
elati
onshi
pbetweenendsandscarcemeanswhi
chhav
ealt
ernat
iveuses.
Thef
oll
owi
ngconcept
scameoutf
rom t
heabov
edef
ini
ti
on:

1.ENDS:i
tref
erst
ot hevar
ioushumanwanti
nthesoci
ety
.Not
ethatendsar
eunl
i
mit
edand
areofv
ary
ingi
mportance.

2.SCARCI TY:Therei
sal ackofcorrespondencebetweenhumanwant sandtheresour
cesto
satisfythem.Thiswant sareunli
mitedandt heresour
cest osat
isf
ythem areli
mitedi
nsupply.I
t
i
st hescar cit
yofresourcethatmanifestintheeconomicsofhumanbei ng.I
fther
ewer eno
scar ci
ty,economicproblem wil
lnotexistandtherewouldn'
thavebeingeconomicsasaf i
eldof
study .

3.SCALEOFPREFERENCE: Thisr
eferstoat abl
eshowi ngthev ar
ioushumanwant sarr
angedin
orderofimport
ance.Scal
eofprefer
encearisesbecauseav ai
lableresour
cesarei
nadequateto
meettheunlimit
edhumanr esour
ce.Forthi
sr eason,anindi
vidual,afi
rm,oragovernmenti
s
compelledtoli
stal
lit
swantsandputt hem i
nor derofimport
ancesucht hatthemostimport
ant
onesareplacedfi
rst
.

4.CHOICE:Afterarr
angementofwant
sinscal
eofprefer
enceeconomicagent
sneedtomake
thei
rchoi
ces.Choicemakingi
nvol
veaconsi
derat
ionofal
ter
nati
veusestowhichscar
ce
resour
cescanbeput .

5.OPPORTUNI TYCOST:Thi sref

erstothewort
hoft hechoicemadebyeconomi cagenti
n
ter
msofalternat
ivelef
tunsati
sfi
ed.I
notherwords,t
heoppor t
unit
ycostofanitem i
swhatyou
giv
eupt ogettheit
em.Oppor t
unit
ycostari
sesfrom thefactthatpeopl
efacetr
adecost.Hence
i
nev er
yeconomicdecisionwemaket heworthi
sev aluat
edi ntermsofalt
ernat
ivefor
gone.

NOTE:Scar
cit
yisthereasonf
ort
hest
udyofeconomi
cs,
wit
houtSCARCI
TYt
hef
iel
dof
economi
cswil
lnotexist
.

THESCOPEANDMETHODOFECONOMI
CS

Thescopeofeconomi
csi
nvol
vest
her
angeorcov
eragei
neconomi
csasadi
sci
pli
ne.

Consider
ingwhet
hereconomicfal
lwi
thinscient
if
icorhumani
tydi
sci
pli
neandexami
newhether
economicanal
ysi
sposit
iveornormat
ivestatement.Thi
sdi
scussi
onshoul
dbri
ngaboutt
he
areasofspeci
ali
zat
ionorstudyi
neconomi cs.

THESUBJECTMATTEROFECONOMI
CS

Ont hesubjectmat
terofeconomi csbyandlarge,t
heformulat
ionofadef i
nit
ionisaconcise
methodofclari
fyi
ngt
hesubj ectmatterofafi
eldofstudy
.Thescarci
tydefini
ti
ongi vi
ngby
Li
onelRobbi
nshasshar peni
ngdefinedthescopeofeconomi csbybuil
dingaboundar ywall
ar
oundit.Therecannomi sconceptionorconf
usionaboutthespher
eofeconomi cs.Any
pr
oblem marksbyscarcit
yofmeansandmul ti
pli
cit
yofendsbecomesi psofactoaneconomi c
probl
em andassuchal egi
timatepartofthescienceofeconomi cs.Thisisbecauseeconomics
i
sconcernedwithaspeci alaspectofhumanbehav i
ourwhi chisallocati
ngscar cemeans
amongcompet ingends.Consequent l
ythesubjectmat terofeconomi csincludestheprobl
em of
managingtheallocat
ionofscar cer
esourcesbybusi nessfirm andt hegovernmentinthe
admini
strat
ionofpublicresources.

Thusthesubjectmatterofeconomicsincludessolvi
ngt hescar
ceresourceallocation
problem i
nconsumpt i
onbyt hehouseholds,product
ionbyf i
rm,governmentbudget ary
processesandt heatt
endantissuesofpricedetermi
nation,wealt
hdistri
buti
on,empl oy ment,
unempl oyment,pover
ty,i
nfl
ati
on,economi cgrowthandt heli
kesinordertoorganizet heover
expandingscopeofeconomi cs,theareaofstudyineconomi cshavebeendi vi
dedbr oadlyinto
twoar eas.(foreaseofanalysi
s).

Thesear
easar
e:

1.Mi
croeconomi
cs

2.Macr
oeconomi
cs

Thet
wooft
hem f
orm whatwi
l
lcal
lcal
l
edeconomi
ctheor
y.

Assi
gnment
:

Whati
sMi
croeconomi
csandMacr
oeconomi
cs.

FI
ELDSOFECONOMI
CS

1.Heal
thEconomi
cs:
Deal
swi
thhowheal
thsect
ori
sbeenmanagef
oref
fi
ciency
.

2.Busi
nessEconomi
cs:
Theuseofeconomi
csi
nrunni
ngy
ourbusi
ness.

3.I
nter
nat
ional
Economi
cs:
Ther
elat
ionshi
pofNi
ger
iawi
thot
hercount
ryoft
hewor
ld.

4.Publ
icEconomi
csorPubl
icFi
nance:
Itdeal
swi
thgov
ernmentbehav
iour
.Howdowe
gener
atemoneyorrev
enue.

5.Env
ironment
alEconomi
cs

6.Tr
anspor
tEconomi
cs

7.Ur
ban&Rur
alEconomi
cs

8.I
ndust
ri
alEconomi
cs

9.Spor
tEconomi
cs

10.Devel
opmentEconomics;itemer
gedaft
ert
heworl
dwar2.West udycount
ryt
hatar
epoorin
devel
opmentEconomics.Afr
icacount
ri
esandsomepartofEast
ernEur
opewhoaresti
l
lpoor
.
SCI
ENTI
FICNATUREOFECONOMI
CS

Themethodol
ogi
cal
tool
sar
esci
ent
if
ict
ool
s.Thet
ool
sofanal
ysi
sineconomi
csar
epur
ely
sci
enti
fi
c.

WhyEconomi
csI
sASci
ence:

1.Sy
stemat
izeBodyofKnowl
edge

2.Pecul
i
arLawsOfTheor
y

3.Test
abl
eHy
pot
hesi
s

4.Abi
l
ityt
omakepr
edi
cti
on

5.Sel
fCor
rect
ive

6.Uni
ver
sal
Val
i
dit
y

SYSTEMATISEBODYOFKNOWLEDGE:
Theyar
eval
i
dat
edandi
thasbeeni
ncl
udedi
nabodyof
knowl
edge.

PECULIARLAWS: Ther
earet heoryyoufi
ndineconomi
cst
hatyoudon'
tfi
ndanywher
e.Aswe
hav
etheori
esinlaw,medi
cine, Agri
cul
tur
alSci
ence,
Chemi
str
yetc,
wealsohavei
tineconomi
cs
whi
chmakei tt
ohaveitpeculiari
ty.

TESTABLEHYPOTHESI S:Hypothesisarestat
ementoffactt
hatneedtobesubjectedto
exper
iment.EgLeader
shipisthemai ncourseofyout
hunemploymentinNiger
ia. Weuse
tool
stomeasurethestatement,col
lectdat
aoni t
.Itmaybeacceptedbasedonresearchormay
berej
ectedbasedonat est
abl
ehy pothesi
s.

ABILI
TYTOMAKEPREDI
CTI
ON:
Aft
ert
est
abl
ehy
pot
hesi
swecanpr
edi
ctwhatwenowhappen
aft
erourexper
iment
.

SELFCORRECTI
VE:Wecanmodi
fyapar
ti
cul
arpol
icyt
hati
sfai
l
ing.I
fther
eisonedef
ici
encyi
n
aknowl
edget
oday,
wecanwor
konittoi
mprovei
t.
UNI
VERSALVALIDI
TY:Economi
cprinci
pleisaccept
ableal
lov
ertheworl
d.Anideamaynot
wor
kbecauseoft
henatur
eofthepeople,notasaresul
tofatest
edpr
inci
ple.

POSI
TIVEANDNORMATI
VEECONOMI
CS

Posi
ti
veEconomi
cs:
iti
sanaspectofeconomi
cst
hati
spur
elyobj
ect
ive.Fori
nst
ance:

I
fyouincr
easet
hepriceofacommodi t
ywhatwill
happent
odemand?Thedemandwi
l
lreduce.
Thati
sanexampleofposit
iveEconomi
csbecauseiti
smeasur
abl
e.

Normat
iveEconomicsi
sval
uelayi
ng,iti
ssubject
ive,
iti
sinf
ormedbypersonal
opi
nion.We
hav
enormati
vestat
ementbecauseeconomicsdealswit
hhumanbeing.

EXAMPLEOFPOSI
TIVESTATEMENT

Af
all
ini
ncomewi
l
lleadt
oar
isei
ndemandf
orcannedsuper
mar
ketf
ood.

EXAMPLEOFNORMATI
VESTATEMENT

Unempl
oymenti
smor
ehar
mful
thani
nfl
ati
on.

Thegover
nmentshoul
dincr
easet
hemi
nimum waget
o30,
000f
rom Nov
embert
oreduce
pover
tyi
nthecount
ry.

ECONOMI
CMETHODOLOGY

Themethodologyofadi
sci
pli
ner
efer
stobasi
cappr
oachcommonl
yusei
nknowl
edge
cr
eat
ioni
nadi scipl
i
ne.

Commonappr
oachi
nknowl
edgecr
eat
ionar
e:

1.Deduct
iveMet
hod

2.I
nduct
iveMet
hod

ECONOMI
CSYSTEM TOSOLVEECONOMI
CPROBLEMS

I
npr
ovi
dingr
esponsest
otheeconomi
zi
ngpr
obl
em,
anumberoff
undament
alquest
ions
neededt
obeanswer
ed.Thesear
e:

1.Howmuchout
puti
stobepr
oduced?

2.Whati
stobepr
oduced?

3.Howi
sthatout
putt
obepr
oduced

4.Whoi
stor
ecei
vet
heout
put
.

5.Cant
hemechani
sm f
orachi
evi
ngquest
ions1-
4adaptt
ochange.

EconomicSy
stem i
npl
acedet
ermi
nesal
loft
heabov
e;i
tcanbedet
ermi
nedpol
i
tical
l
yor
pr
ivat
ely
.

EconomicSystem ser
vetoanswertheabov
eli
stedquest
ion.Aneconomi
csy st
em i
sa
part
icul
arsetofinst
it
uti
onalar
rangement
,andasacoordi
nati
ngmechanism,economi
csyst
em
vari
esfrom onesoci
etytoanot
herfoll
owi
ng;

1.Owner
shi
poff
act
orsofpr
oduct
ion.

2.Methodsbei
ngempl
oyedt
ocoor
dinat
eanddi
recteconomi
cact
ivi
ti
es.(
<--
-Li
kel
yar
eaof
quest
ion).

Eacheconomicsyst
em haspecul
iarf
eatur
est
hatguidei
npr
ovi
dinganswer
stot
hepr
obl
em
ofscar
cit
y.Br
oadl
ywehav e3typesofeconomi
csystem:

1.Pur
eMar
ketSy
stem

2.Tr
adi
ti
onal
Economi
cSy
stem.

3.CommandEconomi
cSy
stem

4.Mi
xedEconomi
cSy
stem

Uni
quel
y,t
her
ear
ethr
eebutt
hef
our
thi
sfr
om t
het
hree.

TRADITIONALECONOMI CSYSTEM isaneconomicsyst

em i
nwhichcustomsandtradit
ions
areemployedtodir
ecthowtheeconomywi l
lmakeuseofscar
ceresour
ces.Theconceptof
pri
vat
epr oper
tyi
softennotwel
ldefi
ned,andpr
opertyi
sfr
equent
lyhel
dincommon.The
answerstothebasi
ceconomicquesti
onsaredeter
minedbycust
om ortr
adit
ion.

Traditional
syst
em werecommoni near
lierti
mes.Nowadays,onlyafew,smal
l,i
solat
ed,sel
f
suf
ficientcommunit
iessti
l
lretai
nsmostfeaturesoft
radi
ti
onal
sy stem.Theyar
elargel
yin
developingworl
dsorcountr
ies.
2.COMMANDECONOMY: Thecommandeconomyi salsoknownascommuni sm orplanned
economy .Thecommandeconomyi saneconomi csystem inwhichpr i
vateresourcesare
publi
clyorpri
vatel
yownedandt hegovernmentusest hecentraleconomypl antodirectand
coordinat
eeconomyact i
viti
es.Deci
sionconcerningthelevelofresourceusage, t
he
composi t
ionanddist
ri
butionofoutput;aswellastheorganizati
onofpr oduction
process/act
ivi
ti
esaredeterminedbyacent r
alplanni
ngaut hori
tyappointedbygov ernment.

Busi
nessf
ir
msar
egov
ernment
all
yownedandpr
oducedaccor
dingt
ogov
ernmentdi
rect
ive.

Bef or
e1990,over1/3oftheworldpopul
ati
onliv
ei ncountr
iesthatrel
yheavi
lyoncent r
al
pl
anningtodealwit
ht hebasi
ceconomicquesti
ons.Today ,
thenumberofsuchcount r
iesare
small
.TheSov i
etUnion,Chi
nausedtobecharacter
izedascent r
all
yplannedeconomist,but
nowincreasi
ngamountofmar ketdeter
minat
ionarebeingaccepted,evenencouraged.

3.THEPUREMARKETECONOMY: I
napuremar keteconomyorpur ecapit
ali
sm all
theeconomy
deci
sionswi
thoutexcepti
onsaremadebyindiv
idual
s, househol
dsandfir
ms; act
ingthrough
unhi
nderedmarket.Ther
eisli
tt
leornoneedforgovernmenti nv
olv
ementthroughplanning,
cont
rolandi
nterv
ent i
on.

Hence, theterm Lai

se-fai
re;iti
soft
enusedtodescri
becapit
ali
sm; ater
mindicat
ingmini
mum
governmenti nter
fer
enceint heeconomy.Gover
nmentrol
e'si
nt hi
stypeofeconomyis
meaninglesst oprot
ectingprivat
eproper
tyandest
abli
shi
nganenv ir
onmentappropri
atet
othe
operati
onsoft hemar ketsystem.

Today,mostcountr
iesi
nthewor l
darefastmov i
nginthedi
rect
ionofcapi
tal
ism.Thi
s
i
deologyofthi
seconomysystem hasvigorousl
ybeenchampionedbytheadvancedorwest
ern
countr
iessuchas;TheU.K,USA,France,Germany,Japanet
c.

4.MIXEDECONOMY: Theterm mixedeconomyrefer

stoaneconomyinwhichbot hfreemar
ket
andgover
nmenthavesigni
fi
canteffectontheal
l
ocati
onofr
esourcesanddistr
ibuti
onof
i
ncomeandwealth.Pur
ecapital
ism andthecommandeconomyar eusual
l
yt woextremes.

Real-Wor l
deconomi esfal
lbet
weenthet wo.Thedegreeofthemixt
ureoff
reemarket
determinati
onandgov er
nmentcont
rolvari
esfrom economytoeconomyoverti
me.Theref
ore,
i
npr act
iceev eryeconomyismixedeconomyasi tcombineselement
sofvari
ouseconomic
systemsi ndetermini
ngeconomicbehaviour
sanddeci si
on.

ASSI
GNMENT

1.I
dent
if
ythr
eecount
ri
esundereacheconomysy
stem.

2.Payat
tent
iont
othegov
ernmentundereacheconomysy
stem.

I
nNiger
iast
ati
sti
csshowst
hatpr
ivat
esect
orhas_
__%whatt
ypeofeconomysy
stem i
sin
Ni
geri
a
EDI
TEDBY

JELI
WIZZY