Explain how economic systems attempt to allocate and make effective use of resources available within the country

(2 a) (A1T2Q4) Sample answer This sample answer is for your reference only. Plagiarizing is a serious offense. You could be excluded from the course if you are caught doing that. Economic systems - An economic system is one that a society attempts to meet peoples material needs and wants through the production of goods and services. From the countrys point of view, production of goods and services is influenced by the limited supply of such elements as labour, land and natural resources and capital. The scarcity of supply of resources means that the Government has to decide the allocation of these limited resources among competing claims, given the opportunity costs associated with the decision of producing a certain products and services within the economy systems instead of others. Type of economies - Different approaches or economies systems are adopted by different countries. In a free market economy, government intervention is kept to the minimum while supply and demand and the ability to pay influence decision making. Most decisions are based on market mechanism. The profit motive of the free market economy, however, give rise to question of who will provide not-for-profit goods and services and infrastructures necessary for the country to meet the needs of the Public? On the other hands, in a command economy, resources are centrally planned and controlled by the government. This, however, means that no freedom for individuals to choose what they produce and what they consume. Most, if not all, countries adopt a mixed economy today. That is, a mixed economy combines elements of both free private enterprises and intervention, in varying guises, by the state. Effective use of resources i. The extent to which the mix economies, for effective allocation of resources, between the government intervention and private enterprises varies from countries to countries. ii. Government interventions are usually in the form provision or prohibition, subsidies or tax and regulation. For example, public goods are priced low or zero to maximize consumption and increase social benefits. Merit goods are encouraged by subsidies to increase consumption whereas the de-merit goods are taxed heavily to reduce social costs. Most government has subsidized heavily education of children to ensure the less fortunate are not left out from the main stream. iii. In the case of telecom business, Singapore Government has provided that telecom

sector to be liberalized in 1998 in line with Singapores broad direction of economic development, that is, to withdraw from commercial activities which no longer need to be undertaken by the public sector. Privatization also allowed government to raise cash through sale of state enterprises, getting rid of poorly managed state enterprises. SingTel has evolved from a government agency since 1955 through the processes of corporatization in 1992 and privatization in 1993 freeing a state enterprise from political interference so that they can function as commercial entities. iv. On the other hand, the Singapore government has created and maintained what is known as an enabling business environment providing the legal and infrastructures needed to support private sector activities to act as the engine of economic growth. By privatization, Singapore government avoided the competition with private sector, hence, creating a business environment that allowed competition among private telecommunication providers. Conclusion - A mixed economy is usually adopted by government to promote free enterprises while some degree of intervention with the objective of effective allocation of resources within country. Singapore is such an example of a mixed economy that has brought about the privatization of SingTel from a government department to be a public listed company.