Characteristics Of Economic System

An economic system is a system of production and exchange of goods and services as well as allocation of resources in a society. The set of organizational arrangements and institutions that are established to deal with economic problems. There are three types of economic system that is Capitalism, Socialism and Mixed Economy.

Capitalism is an economic system in which the means of production and distribution are privately or corporately owned and development occurs through the accumulation and reinvestment of profits gained in a free market. Capitalism affords economic freedom, consumer choice, and economic growth. The characteristics of capitalism are profit motive. Companies exist make a profit. The motive for all companies is to make and

Without competition, monopolies exist and instead of the market setting the prices, the seller is the price setter, which is against the conditions of capitalism. The goal of capitalism is to maximize profit and minimize cost, promoting healthy competition between businesses as they meet the demands of consumer. The merit of capitalism are it is an internally stable economic system, in that it is consistent with human action. Capitalism is also externally stable, in that survival in a capitalistic system requires innovation and flexibility to keep up with the changes in supply and demand. Capitalism is a large population, diversified societies tend to gravitate towards hierarchical social systems. Capitalism easily adapts to such structures. The demerits of capitalism is it is not acceptable in most modern societies to allow portions of their population to be selected. Large imbalance in opportunity encourages revolution, which disrupts and destabilizes the systems. Example of a country practicing capitalism is United States of America. United States the poster child for capitalism the government regulates certain industries, such as the Dodd-Frank Act for financial institutions. By contrast, a purely

Most mixed economics can be described as market economic with strong regulatory oversight. The characteristic of mixed economy is private and public sectors are required to function in a properly coordinated manner. Market forces prevail but are closely monitored by the government. Monopolies may be existing but under close supervision of the government. The merit of mixed economy is both government and private enterprises it has the advantage of taking the benefit of capitalist nature of private companies and socialist nature of government. There is less inequality of income because intend of government is to have a balanced economic growth of an economic. The demerits of mixed economic is since welfare of society is important in a mixed economy it leads to lower than optimum use of the resource because government mobilize the resources towards the production of those goods and services which are beneficial for the society as a whole rather than producing those goods and services which in economic terms are more beneficial for an economy. Under mixed economy private enterprises have to face lot of difficulty because of various government loopholes like favoritism and bureaucratic nature which is prevalent in mixed economy. As one can see that mixed economy like socialist and capitalist economies has both