Business Environment in United Kingdom Essay Example | Topics and Well Written Essays - 2750 words

Business Environment in United Kingdom - Essay Example An economic system are the consists of the people, institutions, processes, procedures that must be followed when making economic decisions to help solve the economic problems that face different economies. The different types of economic systems will determine the decisions on what to produce, how to produce, and who to consume the output. Economic Concepts and Problems The major economic problems that face economies include: the scarcity problem, competition, choice, resources, opportunity costs, needs, efficiency and wants. These are the key concepts that are fundamental in the understanding of the economic problems and that influence the kind of economic decisions that must be made for economic stability purposes and for the attainment of the solutions to the economic problems. The first concept is scarcity. This is a major economic problem that states that human needs are unlimited and resources are insufficient to satisfy all the diverse needs. The society is therefore faced wi th the challenges of the allocation of the scarce resources to attain maximum satisfaction of the unlimited needs. The economic system will therefore determine what to be produced and who to consume. It therefore also mean that a trade off must be made while making the economic decisions. Due to scarcity problem, the individuals in an economy will compete for the limited resources in order to survive. Competition is the scramble for the limited resources in order to acquire a fair share. Businesses and individuals both have to compete for the limited and scarce resources in order not to get eliminated in the system. When competition arises, the government agencies may formulate policies that are aimed at ensuring that the allocation of resources and that the competition is fair for all the participants. Competition has always been desired in order to increase efficiency and improve on the quality. The third important concept is opportunity cost. In economics the pursuance of one dec ision will mean a sacrifice to another possible action. Opportunity cost is the cost forgone for selecting the best alternative. Because the resources that are available in each economy is not enough to produce enough goods and services for everybody, some decisions must be made while others will be sacrificed. Economic systems will assist in the determination on what to produce and what to sacrifice. Needs are the requirements for existence or survival. Individuals in an economy will need food, shelter and good infrastructure for them to have a good life. Businesses as well will need resources e.g. raw materials in production or economic conditions that are favourable for operation. In addition, resources are the commodities or assets that are needed for production of goods and services that are demanded by individuals. Resources have the characteristics that they are limited, get depleted and have utility. The allocation of resources in production determines the manner in which th e economy performs and the output that will be attained. Economic systems are instrumental in the allocation of these scarce resources to maximize the satisfaction that will be achieved in the economy. Moreover, the scarcity of resources in production and in the satisfaction of human needs will mean that a choice must be made in relation to what to produce, quantity to produce, when to produce and who to consume. Choice can be defined as the choosing from among alternatives. In economic problems, a choice must be made on what to pursue among the various alternatives that are existing. The economic system influences the choices that are adopted in the