Types of Economic Systems



Types of Economic Systems | |

|While there are many terms that are used to describe the types of economies that exist in the world, most economists agree that there are four |

|major types of economic systems. |

|You may remember that earlier in the course you learned about the factors of production. To better understand the 4 types of economic systems |

|listed below, you may want to go back and review those factors of production by clicking on the arrow below. |

|TYPES OF ECONOMIC SYSTEMS |

| |Definition |Associated Terms |Examples in Practice |

|1) Market economy |An economic system in which |Free enterprise |United States |

| |individuals own and operate the |Capitalism |Great Britain |

| |factors of production. | |Japan |

|2) Command economy |An economic system in which the |Socialism |Cuba |

| |government owns and operates the |Communism |China |

| |factors of production. | |Laos |

|3) Traditional economy |An economic system based upon |Non-Industrialized |Chad |

| |customs and traditions. Economy is |Agrarian societies |Haiti |

| |based upon agriculture and hunting. | |Rwanda |

|4) Mixed economy |An economic system that has features|See note below concerning mixed economies. |

| |of both market and command | |

| |economies. | |

|In reality there are no pure market economies, nor are there any pure command economies. For example, even in the United States, where free |

|enterprise reigns, the government plays a major role in the economy. Minimum wages, social security, and regulatory policies are examples of |

|government involvement. |

|In China, for example, some private ownership of businesses is allowed, however the government still maintains tight control over the factors of |

|production and prices. |

|While we could say that both the United States and China are mixed economies because they contain both market and command economic features, to do|

|so would be misleading because the role that the respective governments play in the economy are quite different. |

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