By Crystal Cristin

"Understanding Economic Systems: Types and Features in Simple Terms"

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Economic Systerm is a systerm of interrelated production, consumption and exchange of goods and services.

TYPES OF ECONOMIC SYSTEM:

  1. Market Economic System
  2. Socialist Economic System
  3. Mixed Economic System

Explaination:

        1. Market Economics System: This is the economic system in which all the main economic decisions are taken by ownself without any interference or control. Example: UK, Japan etc.

Its features are:

  • Profit motive: Profit is alo the notable features of market economy. All economic activities (production, distribution and exchange) are performed to earn profit.
  • Price Mechanism: In this market the price of proucts or services is determined by the demand and supply conditions.
  • Healthy Competition: This market promotes competition between different producers about quality and price of similar products exists.
  • No government intervention: Limited government role is another feature of free makret economy and all the resources will be under private control.

        2. Socialist Economic System:This is the economic system where all the production and               distribution activities are decided by government or state. Example: North korea, Cuba etc.

Its features are:

  • Collective ownership of resources: In a socialist economy, the entier foundation is based on socio-economic objectives. The welfare of the people takes precedence over the profit motive.
  • No choice for consumer: Every coin has two side so, in a socialist economy, every citizens is guaranteed basic goods, like food, clothing etc. But the consumers donot have absolute freedom of choice.
  • Equal distribution of income: This is one of the main features of a socialist economy. The setup doesnot allow one person to accumulate a lot of wealth.
  • Social welfare: A socialist economic system is oriented to social needs. The government provides full social security.

         3. Mixed Economic System: This is the combination of merits of both free market economic system and socialist economic system.

Its features are:

  • Advantages of economic planning: In the mixed economics planning system of world have taken economic planning as an instrument for rapid planning economic development and growth.
  • Lesser economic inequalities:Capitalism enchances economic inequalities but under mixed economy, inequalities can easily controlled by the efforts of government.
  • Unstability: Some economic claim that mixed economy is most unstable in nature. The public sector gets maximum benefits where as private sector remain controlled.
  • More wasteage: Another problem of mixed economic system is wastages of resources. A part of funds allocated to different projects in public sector goes into the pocket of intermediaries. Thus, resources are misued.