Economic Systems: Three Types Of Economic System?

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Types of Economic Systems

The core concept in economics is scarcity. All individuals and nations face a universal problem that is limitation of resources and choices have to be made. To make a decision of how to allocate the resources, three basic questions need to be answered. The questions are: what to produce, how to produce and for whom to produce. Different economic systems solve these three questions differently. Economic system is generally explained as “a way in which an economy is organized to answer basic economic questions” (Vengedasalam, D., Madhavan, K., 2013, p. 15). In general, economic systems can be classified into three primary categories: capitalism, socialism and mixed.
The first type of economic system is capitalism …show more content…

A mixed economy is a mixture of free enterprise and government control that combines elements of capitalism and socialism. Mixed economy is also called as dual economy. The characteristics of both capitalism and socialism are found in mixed economy. According to the wiseGEEK (2003-2015), primary characteristics of a mixed economy tend to include traces of capitalism, which encourages businesses to create their own wealth, in addition to socialism. With socialism, the government has control over the amount of resources that are distributed and the manner in which those funds and efforts are directed. Another of the characteristics of a mixed economy is the involvement highly of the government by constructing local roads, highways, and public schools. Citizens in the country need to pay government taxes to the government in order to finance such development. Therefore, the participation of both public and private sectors in economic development created many job opportunity for citizens. Besides, the government and the business entities play an important part in controlling the economic activities of the country by making economic decision. For example, the economy in United States is one of the more prominent examples of mixed economy in the world, some decisions about the input and output of product is decided by individuals and firms. “Nonetheless, the U.S. economy is mixed economy, which is an economy that contains a mixture of perfect and imperfect competition and of regulated and nonregulated industries” (Mastrianna & Hailstones, 1995, p. 35). John (1991) reported

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