Outline the major factors that determine the type of economic system existing in a country. Based on the factors describe the principle differences between Australian economy and Chinese economy( max 300 word)
Economic system is a system of production, resource allocation, exchange and distribution of goods and services in the society or a given geographic area. The major economic systems spreaded in the world are: capitalism, mixed economy and socialism. Among the main factors, influencing economic system in a country are: - Historical background of the people; - The extent of wealth and natural resources in the economy; - Political will of the people; - Instability in the mode of governance. Australian economy is an example of capitalism. It is characterized by the dominance of private ownership of the means of production and their operation for profit. It also uses market economy for coordination. Among the central characteristics of this economic system are: private property, capital accumulation, wage labor, voluntary exchange, price system and competitive markets. Chinese economy represents socialism, which s featured by social ownership and democratic control of the means of production. Among others, this economy is characterized by planned economy, classes of society, state responsibility for the basic necessities of life, equal opportunity to all, non-existence of competition and limited choice of consumer products, pricing mechanism.