A market can be defined as a place where the forces of demand and supply operate or where buyers and sellers can interact – directly or indirectly – to trade goods and services. This therefore means that marketing is the process of identifying, anticipating and satisfying consumer requirements effectively and profitably. The concept of marketing is basically to make profit by satisfying consumers in a particular location. In conclusion, the idea of a market and the concept of marketing can be utilized as the economic system of a country/state.
Economic System can be defined as a refereed journal for the analysis of causes and consequences of the significant institutional variety prevailing among all developed, developing, emerging, and transition economies. It can also be defined as an organized way in which a state or nation allocates its resources and apportions goods and services in the national community. The major function of an economic system is to solve the basic economic problems which are; what to produce, how to produce, for whom to produce and how to maximize the use of resources.
“What to produce” simply talks about the goods and services a seller can provide to consumers in order to make profit. This economic problem always brings about opportunity cost {mainly for similar products} because an alternative must be foregone in favor of the other option. In an economic system, the issue of what to produce is addressed either by the government, the private individuals or even both. In a case where the government addresses this issue, a large number of the economy’s resources will be allocated to produce only those commodities that are necessary for day-to-day activities. They therefore show a blind eye to the production of luxury goods and in turn deny their consumers of having options to choose from. An example of such a case is Cuba. In Cuba, the government determine what to produce and only bother about making inferior goods available. Cuba never started providing Coke to its consumers until 1900. However, in a case where private individuals determine what to produce, the exact opposite is shown. Here, consumers have a lot of options to choose from. The quality of the product being supplied is strictly addressed because the motive of the private individual is to make profit. Luxury goods are also supplied in abundance in this case because private individuals focus is on the quality and meeting specific requirements. Finally, in a case involving both the government and private individuals taking up the responsibility of allocating resources, the scenario is somewhat similar to that of private individuals allocating resources. The only difference is that the government is around so as to set regulations in place to reduce exploitation of consumers.
“How to produce” is another economic problem that must addressed before an economic system can function. The question of how to produce is all about the methods with which an economic system would produce its goods. Like the issue of what to produce, how to produce is addressed either by the government, the private individuals or both. If the government determines how to produce then the question of how to produce will be answered by utilizing a labor-intensive method of production so as to increase employment opportunities for their citizens. In the case of where private individuals determine how to produce, then this question will be answered using a capital-intensive method of production. This is because the motive of private individuals allocating resources is to make profit. Therefore the total cost of producing their goods must be as minimal as possible so as to maximize profit and employing a capital-intensive method of production will prove cost-effective. Unlike the labor-intensive method of production, the capital-intensive method does not offer as much employment opportunities since the majority of the production process are done by machines. For example, in the United States, majority of the country’s resources are allocated by the private individuals and because it is cheaper to employ a capital-intensive method of production, private individuals will use it. This therefore leaves a lot of human labour unemployed and as a result, creates a huge gap between the rich and the poor.
The third question to be answered -which is quite simple once the first two questions have been answered- is the question of “who to produce for”. By now, the fact that there are three different types of economic systems- should be crystal clear. In the economic system where the government allocates resources, they produce for the general population. They standardize their products so as to generate a sense of equality among the citizens. In the market economy, the producers {private individuals} produce for those who can afford it. This therefore creates a gap between two sets of people {the rich and the poor}. In the mixed economy however, both the government and the private individuals determine who to produce for with the private individuals having a bigger say in answering this question by setting prices that favor them but the government try to make the products available and affordable to the general public by enforcing a maximum or minimum price or by reducing the private individuals cost of production by granting the producer some form of subsidy.
These economic problems are generated as a result of limited resources whereas human wants for these resources are unlimited. Other functions are; to stimulate economic growth and to attain as much GDP as possible. Therefore, every country would try to employ an effective system which will result in efficient resource allocation to solve the issue of scarcity. Although no economic system can be considered perfect, how efficiently a country can employ an economic system – In terms of allocating its resources – is what determines how successful a country can be in the global market. Although, there are three types of economic systems, in the modern-day world, a lot of countries would prefer to employ an economic system that involves a lot of marketing.