The paper 'Move from Planned Economies to Market Economies" is a perfect example of a macro and microeconomics assignment. Numerous countries around the world began introducing economic reforms in the late 20th century. Previously planned economies they had relied on had its shortcomings, ranging from its contribution to deteriorated standards of living, all through to unsustainable economies under the tight control of the central authorities. For countries like China and the Soviet Union among others in Asia and Europe, introduced market-oriented reforms slowly shifting from the deeply embedded socialism and communism. Though transition into market-based economies had brought certain short-run costs to their economies, no doubt the benefits out-weighed them.
Market economies were boosted by the liberalization of trade policies adopted by countries to pave the way for the free market. Profit maximization Countries that have shifted to market economies have benefitted through profit maximization, which assists to meet the expenses of the nation and improve development. Firms can be able to enhance their creativity and exploit opportunities to make large profits and maximize the value of their various equity holdings. While production, costs incurred and profit margins are affected by decisions of business owners rather than the government, investors are out to make a profit.
Profits margins are influenced by the market set price, which leaves suppliers an opportunity to reap large benefits in the capitalist market. Other than benefiting individuals and corporations, governments have increased their share of revenue through taxation of increasing business under the market economies. Competition and efficiency Privatization of property is a characteristic of the market economy that has helped increase competition of firms’ production in the market.
With ownership of land and resources for products distributed among individuals, and not entirely to the government, they control and use of this resource, taking strategic decisions that not only demonstrate self-interest among investors and business owners but makes production efficient and enhance competition (“ the role of self-interest, ” stlouisfed. org). Most industrialized and developing countries have turned competitive in the global market for their competitive production of quality products/outputs exported abroad. Decisions concerning production and distribution are easy to make, escaping the vast bureaucracy when central governments’ management is involved. The freedom that comes with market economy enables the highest bidder to acquire tenders/contract and market competition to regulate prices. Motivation and innovation One of the criticized features for planned economies is the governments’ power that limits incentives for employees in public institutions.
To keep employees motivated, high incentives would re-energize them to perform even better. Under market economies, investors/private firms provide extensive incentives to their employees to work efficiently, enhance production, creativity and innovation (“ The trend, ” inkling. com). This takes business and nations’ economies to a higher competitive position, driving prosperity and setting in technology and economic development. Explain how current economic indicators such as inflation and unemployment affect the country like UAE. UAE is known for its huge oil deposits, which are its largest contributors to the nations GDP and internal financier for its development.
The unemployment rate in UAE is ranked as one of the lowest in the globe, however, factors such the increasing immigration and economic crisis experienced over the last decade further increased the number of the unemployed. The effects of unemployment in UAE are complex with the ability to affect both the economy and political realm than just the social lives.
One, the greater the number of unemployed people, the lesser the amount of revenue collected by the government through the taxation system. Lack or minimal income reduces their purchasing power, expenditure and leaves the government with no income to tax from.
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