Define the economic systems

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Define the economic systems. 

Explain the three major systems that exist.

Capitalism, Socialism and Communism

Provide an example of a country for each of the systems.

Oct 29th, 2015

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Economic Systems  - Refers to organized task and activities in the allocation of resources, good and services by a nation

Major Economic systems

Mixed Economy

  • Contains a private market and a public (government) owned sector.
  • Allocation of economic resources are done based on market prices and market returns
  •  economic resources are owned by the government
  • It contains a mixture of the features of both the market and command economies

Command (Planned) Economy

  • the government owns all the economic resources and all the factors of production
  • there is no place for private initiative and no incentives at work, since the people don't own economic resources
  • the allocation and channelization of scarce economic resources is decided by the government
  • Political systems in such economies are communist/solialist systems e.g. Kenya

Market economy

  • Consumers reign supreme in a market economy
  • All economic resources are owned by the people
  • The determinants of equilibrium of market price are demand and supply
  • Political counterpart is called Capitalism e.g. USA

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Oct 29th, 2015

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