• Q1. Which economic system is best suited for handling a crisis of epic proportions (hurricane, flood, blizzard, forest fire)? Why?

When a crisis of epic proportions such as hurricane, floods or forest fires occurs a planned economic system is the optimal choice in this respect. This based on the fact that disasters of epic proportions tend to throw the people and functional systems into disarray.

Furthermore, such disasters require allocation of significant resources to control the incidence and prevalence of such disasters. Therefore, the planned economic systems entail the government taking control of resources, implementation of pre-defined disaster response measures and strategies that seek to ease the impacts of such disasters. In the event of this type of disasters, market forces tend to behave erratically leading to unpredicted rise in prices, reduced production of essential goods and services.

As a result, the government takes charge and regulates prices with the aim of ensuring that those affected by the disaster do not suffer unwarranted costs such as exorbitant increase in food prices. In addition, the government mobilizes its agencies and non-governmental organizations through systematic strategy and criterion that ensures the best course of action and response to the disaster is taken. A planned economic system seeks to reduce the spread of the disaster and minimize the impacts that result from such a disaster. Therefore, it attempts to restore normalcy in the economy in the best way possible.

  • Q2. Describe and explain why a socialist system might be the best in responding to the needs of people struck by an emergency situation like the earthquake that occurred Haiti in January 2010.

In cases where a disaster occurs such as the occurrence of an earthquake, the optimal economic system to address such a situation is the socialist economic system. This is because disasters such as the earthquake that occurred in Haiti, are localized to a defined geographic region; as such, it may result in the destruction of critical infrastructure such as roads.

This prevents aid from outside the affected region from reaching the affected area in time. Therefore, socialist economic system comes into play since the affected communities, and individuals join forces, pool resources and develop strategies for delivering aid to those that are in need. Socialist economic system places its focuses on the situation at hand which would entail rescuing victims, offering medical aid, preparation and delivery of food to rescuers, offering victims a place to stay and clothing among other forms of aid.

The socialist economic system integrates the human nature to join forces and help one another in times of need; hence the sociological aspect of human beings becomes the primary driver of the disaster recovery initiatives. Significantly, socialist economic system does not wait for governments to respond or bring resources since such resources may not be near; hence, the people take recovery initiatives without waiting for the government to respond and begin the recovery process.

  • Q3. Use the laws of supply and demand to explain why the cost to heat our homes and businesses goes up in the winter time. Be sure to explain your answer.

The laws of demand dictate that when there is an increase in demand of a scarce commodity, then the prices of such a commodity will increase. The winter is characterized by cold or freezing conditions that require people to use a significant amount of gas to fuel generators, or more electricity is consumed in household heating equipment. Since the demand for fuel and electricity can be equated to an increase in demand for a scarce commodity; then prices of fuel experience an increase in such times.

This is because the cold weather drives people to use more fuel in their generators, in their cars and consume considerable amounts of electricity in order to heat their houses and offices. In addition, while the demand for fuel increases, the supply of oil remains constant; therefore, more oil is demanded while the supply does not change, leading to an increase in the overall costs of fuel. This explains why in cold seasons the price of fuel increases while in hotter seasons there is an observed fall in prices.

Feb 15, 2018 in Business
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