Economics for Business and Management Essay Example | Topics and Well Written Essays - 2750 words - 1

Economics for Business and Management - Essay Example As we know that resources are scarce and wants are unlimited, so there are alternatives uses of the resources available with us. Therefore there has to be a way to make the most efficient allocation of resources, where the largest number of wants is satisfied (Glossary, 2011). Some of the most common ways of allocating resources include Command economy Free market economy Mixed economy Free market or pure market economy refers to capitalist economy where the resources for production of goods and services are allocated by market price, which is determined by market forces of demand and supply. Command economy is one in which resources are allocated by a central authority, and the good of maximum number of people is looked for. Mixed economy is a combination of both pure market and command economy. In it there is private as well as public sector, the private sector comprises of individuals who are free to allocate resources anywhere they want as long as they have the financial strength to do so, whereas the public sector comprises of government control over the economy to an extent. Demand refers to the quantity of goods or service that consumers desire to have at a given price. The law of demand says that as price of a product goes up, its quantity demanded falls, with other things held constant. The reason for it is that as the price goes up the opportunity cost of buying it also rises so people are willing to forgo its consumption and look for alternatives. The graph below shows