The Types Of Economic System

Economic system: It is a system in which the nation allocates its resources and apportions products or services in the society. It is used to control the factors of production like capital, labour, entrepreneurs, information and physical resources.

The types of economic systems:

1)Market economy

The definition of market economy is an economy where most of resources are owned and controlled by the members of society and consumers which encourages economic freedom. The prices of goods and services are determined by the free price system.

The characteristics of market economy are as following:

1) The resources owned by individuals and companies.

2) The profit is the most important thing in this market which motivates the business.

3) The producers are free to produce

3) The differences in income is less because of the role of the government.

4) The monopolies may be available but under the control of the government

The disadvantages of mixed economy:

1) It may be hard to know where exactly the government want to intervene.

2) There may be a lot of market forces that may affect the allocation of resources.

3) The forces of the government can influence the market and causes political factors.

The examples of mixed economy:

This system has been applied in many countries which use both socialist and capitalist policies such as Canada and Western European nations.

3) Traditional Economy

Characteristics: Traditional Economy is a system that shapes how people deal and provide services. In traditional economic individual tends to share their efforts and the group interests overcome the individual interest. It also gives the individual lower authorities comparing to the community. This kind of is outdated and rarely still exists in some areas around the globe where traditions, believes and customs still define the goods and services an economy provides.