Economic Systems

Economic Systems

1. Traditional Economic System

   • Is an economy where traditions, customs, and belives prescribe the principles of economic organization for production of services and goods.
   • Examples
     • Hunting and gathering
     • Herding
     • Barter System (To trade the goods & services for different good and services)
   • Economic Goals
     • Efficiency
     • Equity
     • Economic Freedom
     • Full employement
     • Economic growth
     • Security and Stabilty
   • Characteristics
     • Barter and trade is often used in a place of money
     • Most of the services and good are fully used
     • Many people progress from hunters to farmers where they can place permanent structures and start a society
   • Pros
     • No friction between members
     • Every one unnderstand their role and contribution
     • It more sustainable than an economy based on technology
   • Cons
     • The weather patterns affect a lot
     • Its really vulnerable to command or market economies that use the natural resources

2. Command Economic System

   • Is an economy where the government rather than the free market determines whats goods should be produced,how much should be produced, and the price of the good, it also determines the invests and incomes..
   • Cons
     • Shortage of consumer goods and services
     • Low economic growth
     • Lack of consumer choice and lack competitions by producers
   • Pros
     • Equal distribution of income
     • The state provides all social services
     • There is no wastage caused by competition
   • Examples
     • Cuba, North Korea and the former Sovieth Union are examples of countries that have command economy
     • (China maintained a command ecnomy for decades before transitioning to a mixed economy (capitalistic and communistic)
     • Another really good example could be that in the state of Iran the governments own about 60% of the state bussines that is operating the countrie
   • Economic Goal
     • Security
     • Equity
   • Characteristics
     • The governments owns monopoly bussines
     • The government creates law regulation and directives to enforce the central plan
     • The central plan sets the priorities for the production of all good services

3. Market Economy System

   • Is an economyc system in which economic decisions and the pricing of goods and services are guided by the interactions of a country's individual bussines and citizens
   • Pros
     • Competition drives down prices
     • Minimizes waste
     • Fostering innovation
     • Individual choice
   • Cons
     • Tendency for inequitable distribution of health
     • Poorer work conditions
     • Environmental degradation
   • Economic Goals
     • Efficiency
     • Economic freedom
     • Full employement
     • Security
     • Stability
   • Characteristics
     • Private property
     • Freedom of choice
     • Competition
     • Motivation of self intrest
     • Limited Government
   • Examples
     • United States is a really good example, because there the free flows of goods and services facilitates and protects both producers and consumers, because there is no governmental control and the exchanges of services and goods is determined by the market mechanism of demand and supply
     • England and Japan are also really good examples

4. Mixed Economy System

   • Is a system that combines aspects of both capitalism and socialism, it protects the private property and allows a level of economic freedom in the use of capital but it also allows for governments to interfere in economic activities in order to achieve social aims.
   • Cons
     • There is more emphasis on profit at the expense of the welfare of the citizens.
     • There is usually high level of corruption and mismanagement.
     • Wealth is not equitably distributed as there is a gap between the rich and the poor.
   • Pros
     • It encourages private initiative.
     • It ensures that income is distributed equitably.
     • It ensures job security and employment.
     • Monopoly is prevented because of the joint participation in economic activities by both the private and public sectors.
   • Characteristics
     • Co-exisistance of the private and public sectors
     • Reduction of Inequalities of Income and Wealth
     • Existence of Joint Sector
     • Provision of Social Security
     • Complete Economic Freedom
   • Economic Goals
     • Full employement
     • Stability
     • Economic Growth
     • Efficiency
     • Equity
   • Examples
     • Examples of countries with mixed economy include Iceland, Sweden, France, the United Kingdom, the United States, Russia, China, and Hong Kong