How can scarcity be a problem in the capitalist economy when the shops Essay

How can scarcity be a problem in the capitalist economy when the shops are well stocked, there are over 2.5 million people unemp - Essay Example Thus the concept of exchange arises here. The capitalist countries on one hand have enough amount of capital but they have scarcity of labour which the socialist or the developing economies have. Thus there arises a concept of exchange that would ensure that the production takes place in both the economies in a successful manner. There have been paradoxical evidences however which shows that even in the capitalist countries there is excess supply of labour and the level of unemployment is quite high. This essay is an analysis of this paradox that arises in the context of capitalist economies and the level of scarcity. Discussion of the position In order to proceed with the main problem of the essay it is important to look into the different theories that are necessary to build up the argument. The economic system is a method of the allocation of limited resources of the necessary goods like grain and butter to the economic agents that make up the society. There are various types of e conomic systems like the socialist system, the capitalist system as well as the mixed economy system. In the socialist system the entire decision regarding the allocation of the resources lies with the government existing in the economy. The government acts as the owner of the means of production in such a case (Snooks, 1999, pp. 393-399). Thus the distribution of the grain and butter is mainly done by the government of the country to the people of the country. The production of even the basic grain and butter is done by the factories that are under the ownership of the government. Erstwhile China as well as Cuba and North Korea are examples of such economics where the principles of communism are being practised. The government in such countries is the sole decision maker regarding the level of production and the allocation of resources (Conklin, 1991, p. 427). Alternatively, in case of the capitalist economies the process of production is undertaken by the private players. In almos t all the capitalist economies there is a government but the function of the government is restricted to the regulatory aspects of the country and to ensure that the laws are obeyed. The main function is limited to the collection of the taxes and the protection of the citizens (Stephen, 1998, pp. 31-49). The market power lies mainly with the players that are dominant in the market. The UK, the US as well as the German economies constitute the capitalist nations (Slater and Tonkiss, 2001, pp. 31-40). The characteristics of these nations are that free market is allowed to operate and the prices in the economy are determined by the forces of the demand and supply. The prices of grain and butter would be determined by the market forces of demand and supply. Thus the optimal production would take place at the point where the quantity demanded would be equal to the quantity supplied. Therefore the intervention of the government is this context is almost zero. Source: Winch, 1984, p. 14 Th e optimal price of bread in this economy would be $2.50. However the buyers would be able to buy 2 breads at $3. But this would be subject to the budget constraint of the consumers who buy the product. Alternatively a developed country is one in which the major part of the GDP is contributed by the industry or the services sector rather than the agricultural sector. Thus the developed countries are those which have passed through the various stages of development