Economic Systems: The Different Types Of Economic System

The Different Types of Economic Systems

Every country has a different type of economy. What is an economy? An economy is a system that tries to balance the wealth and resources of a country. These resources are the factors of production: land, labor, capital and enterprise. The country has to balance these resources to satisfy the wants and needs of consumers. It does so by controlling or monitoring what is produced, how it is produced, , and who gets what is produced.

Some countries like Cuba and North Korea use the planned economy system. In this type of economy, the factors of production are owned and manipulated strictly by the government. This means that only the government decides on what to produce, how much to produce, and for

This type of economy is the opposite of the planned economy since we see little or no government intervention. The government plays no role in the administration and legislation of economic activities. It doesn't limit industries by setting regulations and neither does it protect them. Government simply provides essential services like police and defense and also ensures that the country's money supply is stable. This economy is influenced by demand and supply, so the price is set by the demand of customers and the supply of products instead of the government. Countries that run with this economic system are the US and Japan. The advantages in this economy are that businesses are highly motivated by the profits to make products that customers actually want. So, customers and businesses have the freedom to buy and produce whatever they want. Another advantage is that since plenty of businesses produce the same good or service, the competition will ensure that consumers get their products or services at the best price. Disadvantages of this economy include that since government has no intervention, goods or services that are considered as needs to people (health care) can be set at any price. So, those who can afford to pay for healthcare will receive it, and those who cannot pay, do not. In this case, the poor will be deprive of merit goods like food, education and healthcare. Since

This system is a combination of both the planned and free economy. The public and the private sector both decide on how to use the economic factors of the country. Belize and Mexico both have a mixed economic system. Advantages that come with this type of economic system include that businesses can choose what to produce and consume, but production and consumption of harmful products are restricted. The government also controls the price for certain goods ans services, this is a major advantage so that customers can get their basic needs at a fair price. A mixed economy is prone to have less income inequality because government intervention seeks to distribute the country's wealth. Major advantages lay in the fact that if a sector in the economy is bad, the government takes the initiative to improve it, especially agricultural industries, education, banks and merit goods. Prices in this type of system also tend to be better because the government keeps away from having monopolies; competition improves price. The disadvantages in this system are high levels of black marketing and dishonest dealings because the government does not have full intervention to control these industries. Another disadvantage is that business owners must pay taxes that lowers their profits. They they also can't control how the government spends this money; it may go to benefit social programs, or on a cringing note, it can be used for wars.

In conclusion,