Economic Systems : Classification

Economic Systems : Classification

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Economic Systems are the techniques that social orders and governments utilize for the allotment, arrangement and the distribution of services and goods as well as resources across areas. It regulates various aspects of production and distribution, including capital, labor, land, and other physical resources, as a regulatory system.

Classification of Economic Systems

Each kind of Economic System has its own distinctive quality, despite the fact that they all offer a few essential elements. Each economy operates on its own unique set of assumptions and conditions. The following are the main categories:

1. The traditional economic system - is based on products, services, and labor, all of which follow predetermined patterns. It depends most on the people. Also, there exists miniscule division or, specialization of labor. The traditional economy is the most ancient and fundamental of the four. It is most common in rural areas of countries in the second and third world, where farming and other traditional income-generating activities dominate economic activities.

2. Command Economic System - In this, centralized authorities and governments regulate most of the economic processes that include dispensation and the circulation of assets, labor and products. Governments in many command economies have complete control over how valuable resources like oil and gas are distributed and used. Additionally, these kinds of systems may be run by governing bodies that own vital industries like technology, utilities, and energy, as well as transportation.

3. Centrally planned Economic System - In this type of system, the society makes and dictates economic plans to control the production, investments, and allocation of goods, services, and resources. The government only intervenes in production processes to enforce international policy and regulate fair trade agreements. Within an economy that is centrally planned, governments also partake within coordination efforts for the provision of public services.

4. Market Economic System - In a market economic system, also known as a "free-market system," individuals, businesses, and communities use self-interest to decide how to divide up and distribute resources, who to sell and what to produce. In market systems, governments can regulate things like fair trade, the development of policies, and honest business practices. However, they typically have little influence over how businesses operate and generate income.

5. A mixed economic system - is one in which two or more economic practices are combined into a single central system. A mixed economy typically combines a market economy with a command economy to form an economic system in which the market is typically free of government or national ownership. However, essential industries and sectors like transportation and defense can still be under the government's control. In addition, private corporations and businesses are typically subject to the primary oversight of the governing bodies in mixed economic systems.