Economic System

ECONOMIC SYSTEM

 An economic system is a system of production, resource allocation, and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.

  • TRADITIONAL ECONOMY: 
The traditional economy relies upon customs, history, and time beliefs. Traditional economy is dependent upon production and distribution.

Societies with traditional economies trade in agriculture, fishing, hunting, gathering, and other combinations of them. They use bartering instead of money.

  •  COMMAND ECONOMY:
A command economy also known as a planned economy is one in which the central government plans, organizes, and controls all economic activities.

 Command economies do not allow market forces like supply and demand to determine production or prices.

  • MARKET ECONOMY:
A market economy is an economic system where two forces known as supply and demand, direct the production of goods and services.

 Market economies are not controlled by a central authority (like a government) and are instead based on voluntary exchange.

  • MIXED ECONOMY:
A mixed economic system contains both aspects of capitalism and socialism, which consist of private and public enterprises.

 A mixed economic system protects private property and allows a level of economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims. Most modern economies implement a mixed economic system.

 

Role of Economic system in Society

An economic system is a means by which societies or governments organize and distribute available resources across a region or country. Economic systems regulate the factors of production, including land, capital, labor, and physical resources.




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