Economic Systems and Comparative Advantage



Assignment 1: Discussion—Economic Systems, Comparative Advantage

An international business must understand the economic system embraced by the host country and its implications. Moreover, there are powerful economic arguments in support of international trade and they provide a useful perspective on international business.

Research economic systems using your textbook, Argosy University online library resources, and the Internet. Respond to the following:

  • Which economic systems would be most suitable for a country: centrally planned, mixed economy, or market economy?  Since Canada is the #1 trading partner with the USA, focus specifically on Canada. Research Canada’s mixed economy and comparing it to the American economy covering any comparative advantages of Canada. State any assumptions you make and give reasons for your position.



A pure market economy is that market economy whereby the market is free from external control. The people in this market have absolutes freedom to produce what they want, choose where to work and get the thing they need (Uddevalla Symposium, JohanssonKarlsson, & Stough, 2006). The workers are compensated with material things for the services offered and assets are widely owned by private sectors. People have right to change business and take advantages of other opportunities in order to maximize profitability. A mixed economy is that system which embraces elements of centrally planned and free market system. Mixed economy involves partial government regulation of the market and free markets. Most modern economies, for example, the United States are a mixed economy.

A planned economy is an economy which is controlled by one person or group. The business worked together to produce goods and services planned and distributed by the government. In this economic every seller is a supposed to follow guidelines set up by the controlling body. The planning in this market is made to fulfill people needs but in reality, the government never meets the needs. The mixed economy is best for a country because the government control critical services or products for example security and allow the other players or private sector to come up with goods and services. In mix economy, not all products have price ceiling and incentive on products is done in order to influence more purchase.

Canada government controls and manages some sectors such as transportation, agriculture, and fisheries. Some government organization control petroleum chemical, Canadian railways and Canadian Broadcasting Corporation that contribute huge income to the economy (Wonders, 2003). The forests are also owned by the government as well as Regional Park. The economy employees the concepts of socialism in order reduce the gap between the rich and poor. On the other hand, the Canadian market economy allows for the free market and allows people to practices capitalism through utilizing the opportunities presented in the market to maximize profits. The Canadian mix market economy encourages people to specialize in the particular field in order to improve the efficiency of the industry but does not determine what they do.

The Canadian government also helps people who are not stable to take up their lives. The American economy, on the other hand, is referred to as free enterprise system because the economy promotes private investments and public ownership. The approach used is the social-economic system. The governments partially involved in the regulation and guiding the economy but citizen have absolute freedom to choose for whom they would like to work for or buy from. The market decisions are determined by consumer, producers, and government on daily basis. This is because a consumer makes chooses on whom to work and buy from each day while producer makes pricing decision and how much to supply while the government regulates prices.

The government may influence the economy through federal reserves which increase interest rates to control prices; the government came up with an expansionary policy of tax cut in order to improve purchase. Therefore, these policies influence the market in one way or the other. The government in U.S economy promotes public safety by regulating standards on products or services, assure reasonable competition, and provide a range of services including education, justice, the postal services, road system, social statistical reporting, national defense and health (Fishback, & North, 2014). An entrepreneur is free to choose and enter the market whenever they feel like so long as they obtain trading licenses.

The American economy closely resembles Canadian economy because the two countries economy offers freedom to entrepreneurs. An entrepreneur can make a choice on which business to enter so long as it would meet the standards set by the government. The government, in this case, does not control the business but it protects its citizen from exploitation or buying an inferior product. The difference between the two economies is that the Canadian government still venture into selling products, unlike the U.S which concentrate on offering services to its people. The key advantage of the two economies is that people are free to choose where to work and what to produce. A businessman in Canada can set out business in the U.S and survive because the economy is the same even though American economy is highly regulated in order to promote accountability, efficiency and product or services quality.


Wonders, W. C. (2003). Canada’s changing North. Montreal [u.a.: McGill-Queen’s Univ. Press.

Uddevalla Symposium, Johansson, B., Karlsson, C., & Stough, R. (2006). The emerging digital economy: Entrepreneurship, clusters, and policy. Berlin: Springer.

Fishback, P. V., & North, D. C. (2014). Government and the American Economy: A New History.



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