Question

Difference between the three types of economic systems

Answer 1

Answer:

Well,

Explanation:

Economists generally recognize three distinct types of economic system. These are

1) command economies;

2) market economies and

3) traditional economies.

Each of these kinds of economies answers the three basic economic questions (What to produce, how to produce it, for whom to produce it) in different ways.

• A command economy is the opposite of a free market economy. In a command economy system, there is one centralized power, which in most cases is the government. So the government makes all decisions regarding the economy. It will decide which goods and services will be produced, in what quantities. The price will also be determined by such centralized power and not by market forces. In such a planned economy there cannot be any competition. The government has a monopoly in almost all the businesses and sectors. All businesses follow the regulations and instructions of the government and are not influenced by the forces of the economy.
• One of the biggest disadvantages of such a command economy is that the government cannot plan or provide for all its citizen’s individual needs. And so this often leads to rationing. In an ideal world under such a command economy the government should be able to provide a living to all its citizens. However, the reality is different.

• This is the complete opposite of a command economy. A free market economy relies entirely on the free market and free market trends. There is no involvement or interference from the government or any such controlling power. This means there are no rules or regulations imposed on either buyers or sellers. The entire economy is determined by the participants of the economy and the laws of demand and supply.
• a free market economy can show very high levels of growth. It makes private organizations very powerful and influential in the country. So it may create an imbalance of wealth and a scenario where the rich get richer and poor get poorer.

• The Traditional economies are based on ancient rules and are the most basic type of economy. The focus in a traditional economy is only on the goods and services that match their customs, beliefs, and history.Such traditional economies tend to focus primarily on agriculture, cattle herding, fishing etc. A traditional economy will use the barter system and has no concept of currency or money. Their economies center around their tribes or families. Such economies believe in only producing what and how much they require. They find no need to produce any market surplus. There is no concept of trading .

Answer 2

Answer:

Traditional systems focus on the basics of goods, services, and work, and they are influenced by traditions and beliefs. A centralized authority influences command systems, while a market system is under the control of forces of demand and supply. Lastly, mixed economies are a combination of command and market systems.