Economic Systems PDF

What is an economic system? ►An economic system is the way a society organizes the production, distribution, and consumption of goods and services to meet the needs and wants of its members. TYPES OF ECONOMY SYSTEMS Types of Economic Systems Capitalism ( Free Market): ► In capitalism, also k...

What is an economic system? ►An economic system is the way a society organizes the production, distribution, and consumption of goods and services to meet the needs and wants of its members. TYPES OF ECONOMY SYSTEMS Types of Economic Systems Capitalism ( Free Market): ► In capitalism, also known as the free market or market economy, most economic decisions are made by private individuals and businesses. ► Private ownership of resources and the means of production is a key feature. ► Prices are determined by supply and demand in a competitive market. ► The government's role is limited, primarily focused on enforcing laws. Types of Economic Systems Command/Planned (Socialist): ► Socialism is characterized by collective or state ownership of key industries and resources. ► The government plays a significant role in planning and controlling the economy. ► The goal is to achieve social equality by redistributing wealth and providing essential services. Types of Economic Systems ► Command/Planned Cont’d: ► In a command economy, also known as a planned economy, the government has central control over economic decisions. ► The government owns or controls most resources and production. ► Prices and production levels are set by government planning rather than market forces. Question: State the advantages and disadvantages of this system. Types of Economic Systems Mixed Economy ( Private & Public): ► A mixed economy combines elements of both capitalism and socialism. ► Governments in mixed economies typically regulate industries and provide public goods. ► The majority of economic activities are still driven by the private sector, but the government intervenes to address market failures and promote social welfare. Question: State the advantages and disadvantages of this system. Types of Economic Systems ► Traditional Economy (Subsistence): ► In a traditional economy, economic decisions are based on customs, traditions, and historical practices. ► Production methods often remain unchanged over generations. ► Barter and trade are common and there is minimal use of currency. ► Traditional economies are typically found in rural or isolated communities.