According to Hunt and Colander, an economic system performs four major functions regardless of its type. These functions are what to produce, for whom to produce, in what way the company produces goods and commodities, and how it will distribute them.
According to the questionnaire writing service information, there are many concerns regarding the allocation of resources among possible alternatives. Sometimes, one has to make a hard choice between what to produce, and this aspect refers to the opportunity cost. The choice that one has to make is to allocate available resources and decide how much a company will produce.
Another function is how the firm will produce goods or services. Production is considered inefficient when companies are able to reallocate their resources. In addition, if technology is not sufficiently developed in a given society, it is necessary to choose those technologies that require a relatively large contribution of labor. In the course of technical progress, the laboriousness of production reduces and its capital intensity increases. Economic system must choose the most effective mode of production, one that allows the companies to get the most out of existing resources.
Another important function is to whom to distribute the production. The perfect distribution of commodities is the equal distribution among all consumers. However, the present-day economy has never reached it. In order to use maximum from the scarce resources, the company should produce commodities in those areas where it is demanded with minimized costs. The production may be located closely to the market centers and sources of raw material depending on the products’ nature.
The other main function is the distribution of finished goods and services. The final division of commodities is made among individuals who need them. The economic system chooses the desired products, distributes resources, picks the best technology, and finishes production. Subsequently, the company distributes products. In terms of division of labor, it is necessary to exchange the finished production and choose necessary proportion subsequently.
Economic systems refer to the means by which society makes decisions including economic variables. Economies determine in what way the communities respond to the basic important questions of what to produce, how the products will be manufactured, who will get them, and in what way the company will promote the future growth.
