Explain the concept of different types of economies
Answers
Traditional Economic System
A traditional economic system focuses exclusively on goods and services that are directly related to its beliefs, customs, and traditions. It relies heavily on individuals and doesn’t usually show a significant degree of specialization and division of labor. In other words, traditional economic systems are the most basic and ancient type of economies.
Command Economic System
A command economic system is characterized by a dominant centralized power (usually the government) that controls a large part of all economic activity. This type of economy is most commonly found in communist countries. It is sometimes also referred to as a planned economic system, because most production decisons are made by the government (i.e. planned) and there is no free market at play.
Market Economic System
A market economic system relies on free markets and does not allow any kind of government involvement in the economy. In this system, the government does not control any resources or other relevant economic segments. Instead, the entire system is regulated by the people and the law of supply and demand.
Mixed Economic System
A mixed economic system refers to any kind of mixture of a market and a command economic system. It is sometimes also referred to as a dual economy. Although there is no clear-cut definition of a mixed economic system, in most cases the term is used to describe market economies with a strong regulatory oversight and government control in specific areas (e.g. public goods and services).