Yr 12 Economics Essay
1) Outline the economic problem faced by Iraq
The economic problem of Iraq is how to use what little resources they have
to satisfy the countries unlimited wants. Iraq is only just starting to
recover from the brutal regime of Saddam Hussein and with the Americans
trying to help rebuild the process is coming along steadily. The country is
very oil rich but because of previous wars many of the oil refineries are
badly damaged or destroyed, this means that they have very little to
export. There was a time when the country was farmed but again under the
regime of Saddam Hussein to much emphasis was put on oil production on no
money was put into the agricultural sector, thus the industry went broke.
This had led to a decrease in exports from agriculture but it has also
meant that Iraq has had to import food that it would normally produce in
its own backyard. This may not seem a bit issue but over a decade it will
end up costing the country millions. The economic problem within Iraq is
the same for all countries, how to use their limited resources to satisfy
their unlimited wants. In their case though they have to rebuild the whole
country with their resources and try and get the country to achieve a
2) Explain what type of economic system would best suit Iraq and how Iraq
would decide the What, How and For Whom decisions faced by all societies.
Iraq needs a new economic system after the U.S.A overthrew the Saddam
Hussein dictatorship. It is obvious that they will need a mixed economy as
is outlined below. This will help them to eventually get back on their own
two feet, without relying on other countries for foreign debt.
A traditional economic system is one in which individuals produce
goods and services for the peoples own use and not for exchange. Customs
and age old traditions play an important role in the way people cater for
their needs. Iraq would need some sort of traditional economy to produce
agricultural goods which once upon a time made up a significant part of the
Iraq exports along with oil.
In a market economy decisions are made according to the market forces
rather than tradition. Households and firms made spendingdecisions
according to their own private wants. The “What to Produce” is decided by
the interaction in the market place of consumers, business and government.
With the power of “What to Produce” belonging to the people it gives them
greater flexibility in what is created. Consumers make most “What?”
decisions through casting dollar votes in the market. “How to Produce” is
mainly decided by the managers of businesses who choose a combination of
resources which is most efficient and cost effective. They produce at the
lowest cost so as to receive the greatest profit.
“For Whom to Produce” is determined by people’s ability to pay. Those with
the highest incomes receive the greatest access to what is produced. A
Market economy would help Iraq because the people get to choose what is
produced by casting dollar votes. It will also give them the ability to
change products if necessary. The market price would be determined by
supply and demand rather than on what the government say. Also most
resources are privately owned and therefore the profits belong to the
people and will not go the government. This will benefit the rest of the
community because the money will stay within the community when it is spent
and provide others with an income.
A planned economy is one where the basic economic decisions are made
by government on behalf of the people and resources are owned in common, by
the people and allocated by the government. The most important belief in
the ideology of a command economy is that everyone should have equal access
to the economy’s production of goods and services. This means that every
citizen should receive the same wage. Decisions about “What to Produce” are
made by a central bureau that sets plans for the production pf capital and
consumer goods. Individuals have little influence over what is produced.
Decisions about “How to Produce” are also made by a central bureau.
Productive resources are socially owned and controlled by the state.
Methods of production are determined on the basis of what is socially
desirable. The central bureau will choose the method that is best for the
people and not necessarily the cheapest to produce. This might mean instead
of using machinery to make a dam they will use human labour. This will
benefit the community because a lot more people are employed, and more
money is in the community. This would help Iraq because the people are
going to be able to find jobs easily, and money will be available to anyone
who is willing to work, this way more people will have a decent quality of
“For Whom to Produce” decisions are based on the social good of the
community. There is greater equality of income distribution. The State
determines incomes and prices. Allocation of resources is largely dictated
by a central authority. This system provides few material incentives. Moral
and social incentives play a larger role, such as worker of the month
awards. This type of economy would be a great advantage to Iraq because the
people would have all their needs in terms of food and clothing met by a
central bureau. This would create an equal society with only a small gap
between the rich and poor.
The best sort of economy for the country of Iraq would be a mixed economy.
Utilizing the most effective parts of all the different kind of economies
Iraq would have a very sound system operating in their country.