Explain The economic systems attempt to allocate resources.
The decisions regarding the allocation of the resources are very important as it is the world of scarcity. The economic system helps to solve the problem which is related to the allocation of resources. The central government determines what is produced, how it is produced and for whom it is produced. As per the economists, “what is produced” criterion is determined by the final buyer of the commodities and services (Economic Systems for Resource Allocation 2016).
The centrally planned model also referred to as the command economy is characterized by leading government sector which is coupled by with the general ownership of resources. The place of the price mechanism is taken by the central planning authority which in turn helps in the allocation of the resources. The values of the command economy are shown below with the help of the graph.
The impact of monetary and fiscal policy on the business organization
Expansionary Fiscal Policy – When laws are passed by the legislative in order to rise the spending of the government or to lower the taxes, it termed as the expansionary fiscal policy. This fiscal policy helps to relieve the economy from recession. When the individuals have to pay less tax, the government will increase consumerism in order to help the business. The increase in the spending of the government leads to the enlargement of the growth rate of the nation. As a result, the business organizations add to increased cost savings (Manuel, 2016).
Contracting fiscal policy – This fiscal policy increases the tax rate and as a result, the individuals will have less money to invest. This in turn reduces the spending of the government and the sales of the Bank of England declines as a result of unemployment.
Increase in the monetary policy – The expansionary monetary policy helps the economy to boost with the help of low rate of interest as well as larger supply of money. With the increase in the supply of money, the government builds up more money without any increase in taxes. This in turn helps the Bank of England to get loan at a cheaper rate.
Diminishing monetary policy – The diminishing of the monetary policy is mainly done to put off the economic fizz. With this policy both the government and the Bank of England will suffer (Forsythe, 2012).
The impact of the competition policy
The competition policy is central to the regulatory mechanisms as its objectives and the analysis forms a point of reference in order to assess the quality of its financial and social regulations. The competition policy is contradicted by the regulation. The Bank of England has been a perpetual victim due to the regulatory capture of the banking industry. The departments for business and the innovation and skills have undertaken the regulation of the firms as well as the promotion of the competition in the UK (Wise 2016).
Market structure determining the pricing and the output decision
The places where the buyers and the sellers contact each other and exchange the commodities and services takes place are known as the market. One of the characteristics of the market is the structure of the market. The different type of market structure includes perfect competition, monopoly and oligopoly. Under the perfect competition market structure there are various sellers of the commodities. As a result, the price and the output decision of the business depend on the demand of the commodities. The output decisions are mainly taken by the firms and the pricing decisions are taken by the buyers in the market (Baldwin and Scott 2013).
In the monopoly market structure, the pricing decisions are taken by the firms and customers will have no other choice other than buying the products as they will have no other options. The output decision is also taken by the firm under this market structure in a business.
Under the oligopoly market structure, the pricing decisions are determined by the sellers since there are many sellers in the market. The prices will be charged in such a manner that the buyers get attracted towards the products sold by them (Chand 2016).
Baldwin, W. and Scott, J., 2013. Market structure and technological change(Vol. 18). Taylor & Francis.
Chand, S. (2016). Price determination under oligopoly market. Smriti Chand.
Economic Systems for Resource Allocation. (2016). pp.31-35.
Forsythe, A. (2012). Fiscal Policy. Aaron Forsythe.
Manuel, N. (2016). The Implications of Fiscal Policy and Monetary Policy to Business. Nicole Manuel.
Wise, M. (2016). THE ROLE OF COMPETITION POLICY IN REGULATORY REFORM. Italy: Michael Wise, pp.4-6.