Three Types Of Economic System
Introduction There are three types of economic system which are practiced in this world. They are: i) Command economic system ii) Market economic system iii) Mixed economic system Command economic system Command economic system is a system where the government decides what goods should be produced, the amount should be produced and the price at which the goods will be offered for sale rather than the free market. The command economy is a key feature of any communist society. For example, the countries that have this economy system are Iran, North Korea and the former Soviet Union. The costs are set by the central planners, but they do not serve, as in a business sector economy, as signals to producers of goods to increase or decrease …show more content…
It is also called as free enterprise economy because most of the decisions are not made by the government but the buyers and sellers. Every seller is trying to maximize their profit and buyers are trying to maximize their utility. These decisions in market economy are effected by the pressures of supply, competition, and demand. Although the purpose is inconsiderate as it works to the advantage of the economy over the long run. Their property like labor resources, capital resources and natural resources are owned by the individual and institutions. This allows the owners of the property to make legal binding to buy, sell, or rent their property as the …show more content…
The prices of the needs of human were all under control by the government. It is better than the market economy system which will lead to the citizens unable to pay for the needs. In command economy system, there is no decision made by the citizens. Therefore they will lack of motivation to do anything because everyone get the same wages. The economic plans are implemented through laws and regulations and directives. In market economy system, producer and consumer have their right to make decision. This means that the price is set by the market conditions with minimal government intervention. By the way, the government ensures the higher economic growth is attained. In mixed economy system, government played the important role because they control the fail or works in price mechanism, provides some goods such as public, merit and control item. When facing surplus or shortages in the market, government may take appropriate action to adjust the
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