explain the different types of economic system and their characteristics
Answers
Explanation:
What is an Economic System?
An economic system is a means by which societies or governments organize and distribute available resources, services, and goods across a geographic region or country. Economic systems regulate factors of production, including capital, labor, physical resources, and entrepreneurs. An economic system encompasses many institutions, agencies, and other entities.
1. Traditional economic system
The traditional economic system is based on goods, services, and work, all of which follow certain established trends. It relies a lot on people, and there is very little division of labor or specialization. In essence, the traditional economy is very basic and the most ancient of the four types.
2. Command economic system
In a command system, there is a dominant, centralized authority – usually the government – that controls a significant portion of the economic structure. Also known as a planned system, the command economic system is common in communist societies since production decisions are the preserve of the government.
3. Market economic system
Market economic systems are based on the concept of free markets. In other words, there is very little government interference. The government exercises little control over resources, and it does not interfere with important segments of the economy. Instead, regulation comes from the people and the relationship between supply and deman.
4. Mixed system
Mixed systems combine the characteristics of the market and command economic systems. For this reason, mixed systems are also known as dual systems. Sometimes the term is used to describe a market system under strict regulatory control.
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The different types of economic systems are- Capitalist, Socialist and Mixed economic systems.
- The economic system refers to the way in which the government distributes the resources in the country.
- There are three types of economic systems- Capitalist, Socialist and Mixed Economy.
- We can understand the above-mentioned types of economic systems through their characteristics:-
- Capitalist Economy/Market Economy- In a capitalist economy, the means of production are owned by private individuals. The production of goods and services is driven by their demand and supply in the market. The role of Government is minimal in such an economy. Example- USA, UK, Germany
- Socialist Economy/Command Economy- In a socialist economy, Government owns the means of production in the economy, the government decides what to produce, how to produce and how much to produce. Example-Cuba, China, North Korea
- Mixed Economy- Mixed economy includes both private and public ownership of means of production in the country. It involves some form of government intervention through the regulation of economic activities. It is the most commonly adopted form of economy. As it is believed it incorporates the best of both systems. Example- India, France
- Thus, these are the various types of economic systems that are found in different countries of the world.
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