Economic Systems: Three Types Of Economic System?

1333 Words3 Pages
bulb-icon

Recommended: Comparing capitalism, socialism and communism

Types of Economic Systems

The core concept in economics is scarcity. All individuals and nations face a universal problem that is limitation of resources and choices have to be made. To make a decision of how to allocate the resources, three basic questions need to be answered. The questions are: what to produce, how to produce and for whom to produce. Different economic systems solve these three questions differently. Economic system is generally explained as “a way in which an economy is organized to answer basic economic questions” (Vengedasalam, D., Madhavan, K., 2013, p. 15). In general, economic systems can be classified into three primary categories: capitalism, socialism and mixed.
The first type of economic system is capitalism …show more content…

A mixed economy is a mixture of free enterprise and government control that combines elements of capitalism and socialism. Mixed economy is also called as dual economy. The characteristics of both capitalism and socialism are found in mixed economy. According to the wiseGEEK (2003-2015), primary characteristics of a mixed economy tend to include traces of capitalism, which encourages businesses to create their own wealth, in addition to socialism. With socialism, the government has control over the amount of resources that are distributed and the manner in which those funds and efforts are directed. Another of the characteristics of a mixed economy is the involvement highly of the government by constructing local roads, highways, and public schools. Citizens in the country need to pay government taxes to the government in order to finance such development. Therefore, the participation of both public and private sectors in economic development created many job opportunity for citizens. Besides, the government and the business entities play an important part in controlling the economic activities of the country by making economic decision. For example, the economy in United States is one of the more prominent examples of mixed economy in the world, some decisions about the input and output of product is decided by individuals and firms. “Nonetheless, the U.S. economy is mixed economy, which is an economy that contains a mixture of perfect and imperfect competition and of regulated and nonregulated industries” (Mastrianna & Hailstones, 1995, p. 35). John (1991) reported

Show More
Related

  • David M Kotz's The Rise And Fall Of Neoliberal Capitalism

    1092 Words  | 3 Pages

    An economic and political system in which a country 's trade and industry are controlled by private owners for profit, rather than by the state is known as Capitalism. Many components make up a capitalist society such as the factors of production are privately owned. The economic transactions take place in markets where buyers and sellers interacts, and many business and employees are free to pursue their own self interest. The United States is known to follow the ideals of a capitalism throughout the years but as many as 32 recessions have taken place in the last 150 years. The economy seems to be unstable and the question arises, why is capitalism so dynamic and unstable? In the novel “The Rise and fall of Neoliberal Capitalism”, David M Kotz analyzes and answers the many

    Read More

  • The U.S. Free-Enterprise Economy

    788 Words  | 2 Pages

    The United States is known for having a free-enterprise economy where a business can be conducted freely without government involvement. In free-enterprise economies, goods and services are traded openly and are produced depending on the demand. People who support this type of economy believe it motivates businesses to make money and welcome new ideas. An important part of the economy is full employment and low inflation. Keynesianism and monetarism are both ways to stabilize the economy and promote growth when needed.

    Read More

  • A Critique of Nassim Taleb's The Black Swan: The Impact of the Highly Improbable

    1095 Words  | 3 Pages

    As economies develop and change we need to look at the factors that influence this. Weather, resources, location and labor prices are a few examples of this. Another influence is government policies. There are three types of economies: command, market and mixed. In a market economy. In a command economy the government controls the economy. It decides what will be produces, wages and prices. Socialism and Communism are examples of a command economy. In a market economy the economy is controlled by individuals. In a pure market economy the government is absent from the economy. A mixed economy has element from both a command and market economy. The economic decisions are made by the people but the government plays a role in the resources. Most developed countries today have a mixed economy.

    Read More

  • Capitalism Dbq Analysis

    872 Words  | 2 Pages

    Economic systems are affected by the two opposing systems of capitalism and communism. They each can meet the needs of people; however, both affect the lives of people in good and bad ways, affecting industrialized nations and nations in the process of being industrialized. Capitalism is all about wealth and the wealth of people. Capitalism met the needs of the people because the right to property was created. You can own your own house, factories and land.

    Read More

  • Elliott Currie's View Of Crime In A Market Society

    542 Words  | 2 Pages

    A market economy that fails, to address the needs of at-risk children and adults. Currie feels Americans are so focused on the economy that there is no regulation, Americans also believe, it is a free market, and that individuals are responsible for their own failures or success. This type of economy is a system in which economic resolution and pricing of goods and services are determined and focused entirely by the aggregate of country’s citizens and business with little government intervening or central planning. This means private firms account for all production. Meaning consumers decide what should be produced, based off of what they have purchased.

    Read More

  • Belgium Culture Vs American Culture Essay

    663 Words  | 2 Pages

    In the U.S. the economy is mainly based on a free enterprise system. This means

    Read More

  • Monetary Policy

    1670 Words  | 4 Pages

    The Economy is the backbone to society. There are many factors that operate in, and govern our society’s economical structure. Factors such as scarcity and choice, opportunity cost, marginal analysis, microeconomics, macroeconomics, factors of production, production possibilities, law of increasing opportunity cost, economic systems, circular flow model, money, and economic costs and profits all contribute to what is known as the economy. These properties as well as a few others, work together to influence the economy. Microeconomics and Macroeconomics are two major components. Both of these are broken down into several different components that dictate societal norms and views.

    Read More

  • 1.02 Food And Shelter

    763 Words  | 2 Pages

    We have mixed economy on our island (an economic system in which both government and individual play important role in production and consumption) b.Everyone on the island have freedom to make their own individual choices, like how they want to live, eat and do thing, but they also need the acceptant of government/leader so everyone is safe and

    Read More

  • Types Of Welfare Systems

    943 Words  | 2 Pages

    The time following the Second World War turned out to be a crucial time for the development of national welfare states. European countries took different approaches to support their people. Some countries like the United Kingdom built a completely new welfare system while others like Germany and Austria decided to keep existing social welfare systems (Kaelble 264). Ultimately different plans and ideas regarding welfare led to divisions between countries that still exist. Different countries have different values regarding the necessary level of contribution one must put in to receive welfare benefits. Additionally, countries disagree on how generous benefits should be. All of these competing philosophies and visions have led to the creation

    Read More

  • Capitalism : Capitalism And Capitalism

    1030 Words  | 3 Pages

    Capitalism at first seems like a beneficial idea that can help to support and drive a society, but upon further inspection, there is a great deal of instability in a Capitalistic society. One of the main outcomes of capitalism is greed. Throughout the recession the rich upper class continued to become astoundingly richer, while the poor lower class became persistently poorer. Moreover, a capitalistic system finds a way to make a profit from anything or from anyone. Alienating workers turning them against each other to focus on the common goal: profit. This is an example of how capitalism estranges employees in the workforce. In this type of capitalistic system employees are forced to compete with one another, therefore, alienating themselves from each other. Which can lead to a feeling of isolation and depression. For example, Carl was a successful business man that served the capitalistic hegemonic society, however, mentally and emotionally the work that he was doing was unfulfilling. Carl said that he would always make decisions based on what he was expected to do; based on what society anticipated of him; this is an example of hegemonic masculinity in everyday life. Eventually, Carl divorced his wife, his kids moved out, and he no longer worked for a successful company. In a capitalist society how does one overcome such alienation? Carl believes the answer lies in mindfulness and self-meditation. Carl argued that an individual should not serve work; should not serve capitalism, but rather that work should serve the individual. He encourages individuals to follow their passion and even to try and monetize their passion, however not all people have a passion that is capable of being monetized. He also argues that individuals shou...

    Read More

  • Scarcity: The Universal Healthcare System

    1670 Words  | 4 Pages

    Scarcity is frequently known as the universal economic problem. It recognizes that us, as citizens have unlimited wants and needs from a variety of limited commodities. Instead of everybody getting what they want, these resources must be split up in ways that may seem unfair to some. These resources include food, clothes and medicine.

    Read More

  • Capitalism and Merit, Ability and Achievement

    1280 Words  | 3 Pages

    The world’s economies continue to be divided on by whom their means of production benefit, supply, enrich, and protect. Many debates and altercations have been a result of disagreements between capitalists and socialists. Socialists believe the government is essential in providing equality for all and the allocation of capital goods. But the strength of capitalism can be attributed to an incentive structure based upon the three P’s: (1) prices determined by market forces, (2) a profit-and-loss system of accounting and (3) private property rights. The failure of socialism can be traced to its neglect of these three incentive-enhancing components. (Perry) Socialism gives power to the government to regulate the goods produced, the amount of goods produced, where the goods are distributed, and the price of the goods. This command system does not allow for the creativity, wealth, and freedom that capitalism supplies the citizens. Capitalism provides a market system that permits companies to regulate the economies themselves. Capitalism offers the world’s economy the freedom to manage itself, diversify, prosper, fail, and freedom from regulation in order to supply the world based on demand and creativity. Capitalism is the only social system that rewards merit, ability and achievement, regardless of one’s birth or station in life. Capitalism is the only social system that rewards virtue and punishes vice. This applies to both the business executive and the carpenter, the lawyer, and the factory worker. (Thomson) Capitalism is the world’s dominant economic system. Within it, the means of production and distribution are owned by individuals: private ownership and free enterprise are believed to lead to more efficiency, lower prices, be...

    Read More

  • Advantages And Disadvantages Of A Mixed Economy

    1247 Words  | 3 Pages

    Discussion and comparison based on the four types of economic systems Already we have mentioned four basic types of economic systems that are used in different conditions with different application.

    Read More

  • Economic Systems

    1104 Words  | 3 Pages

    However, in the market economy, national and state governments play a slight role. The assumption of the market plays a major role in deciding the right path for a country’s economic development. Mixed economy combines elements of both the command and market economies in one interrelated system. Certain features from both market and command economic systems are taken to form this type of economy. The market system is clearly the most effective economic system.

    Read More

  • Microeconomics Reflection

    1401 Words  | 3 Pages

    There are two types of economic systems that a society may adhere to; which are polar opposites. The Command system, also known as communism or socialism. In a command economy, the government owns the majority of the resources, and all decisions for the society is made based on a central plan. The command system has been adopted by countries such as the Soviet Union, China and North Korea. This economic system is commonly used by countries under a dictatorship. Despite the negative aura surrounding a dictatorship this system does have its pros and

    Read More

More about Economic Systems: Three Types Of Economic System?

Open Document