Yr 12 Economics Essay1) Outline the economic problem faced by IraqThe economic problem of Iraq is how to use what little resources they haveto satisfy the countries unlimited wants. Iraq is only just starting torecover from the brutal regime of Saddam Hussein and with the Americanstrying to help rebuild the process is coming along steadily. The country isvery oil rich but because of previous wars many of the oil refineries arebadly damaged or destroyed, this means that they have very little toexport. There was a time when the country was farmed but again under theregime of Saddam Hussein to much emphasis was put on oil production on nomoney was put into the agricultural sector, thus the industry went broke.This had led to a decrease in exports from agriculture but it has alsomeant that Iraq has had to import food that it would normally produce inits own backyard. This may not seem a bit issue but over a decade it willend up costing the country millions.
The economic problem within Iraq isthe same for all countries, how to use their limited resources to satisfytheir unlimited wants. In their case though they have to rebuild the wholecountry with their resources and try and get the country to achieve asurplus budget.2) Explain what type of economic system would best suit Iraq and how Iraqwould 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 SaddamHussein dictatorship. It is obvious that they will need a mixed economy asis outlined below.
This will help them to eventually get back on their owntwo feet, without relying on other countries for foreign debt.A traditional economic system is one in which individuals producegoods and services for the peoples own use and not for exchange. Customsand age old traditions play an important role in the way people cater fortheir needs. Iraq would need some sort of traditional economy to produceagricultural goods which once upon a time made up a significant part of theIraq exports along with oil.In a market economy decisions are made according to the market forcesrather than tradition.
Households and firms made spendingdecisionsaccording to their own private wants. The “What to Produce” is decided bythe interaction in the market place of consumers, business and government.With the power of “What to Produce” belonging to the people it gives themgreater flexibility in what is created. Consumers make most “What?”decisions through casting dollar votes in the market. “How to Produce” ismainly decided by the managers of businesses who choose a combination ofresources which is most efficient and cost effective. They produce at thelowest cost so as to receive the greatest profit.
“For Whom to Produce” is determined by people’s ability to pay. Those withthe highest incomes receive the greatest access to what is produced. AMarket economy would help Iraq because the people get to choose what isproduced by casting dollar votes.
It will also give them the ability tochange products if necessary. The market price would be determined bysupply and demand rather than on what the government say. Also mostresources are privately owned and therefore the profits belong to thepeople and will not go the government. This will benefit the rest of thecommunity because the money will stay within the community when it is spentand provide others with an income.A planned economy is one where the basic economic decisions are madeby government on behalf of the people and resources are owned in common, bythe people and allocated by the government. The most important belief inthe ideology of a command economy is that everyone should have equal accessto the economy’s production of goods and services.
This means that everycitizen should receive the same wage. Decisions about “What to Produce” aremade by a central bureau that sets plans for the production pf capital andconsumer 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 sociallydesirable. The central bureau will choose the method that is best for thepeople and not necessarily the cheapest to produce. This might mean insteadof using machinery to make a dam they will use human labour.
This willbenefit the community because a lot more people are employed, and moremoney is in the community. This would help Iraq because the people aregoing to be able to find jobs easily, and money will be available to anyonewho is willing to work, this way more people will have a decent quality oflife.”For Whom to Produce” decisions are based on the social good of thecommunity. There is greater equality of income distribution. The Statedetermines incomes and prices.
Allocation of resources is largely dictatedby a central authority. This system provides few material incentives. Moraland social incentives play a larger role, such as worker of the monthawards. This type of economy would be a great advantage to Iraq because thepeople would have all their needs in terms of food and clothing met by acentral bureau.
This would create an equal society with only a small gapbetween 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 economiesIraq would have a very sound system operating in their country.pic