Economic Systems
Individuals or Government? ; attempt of answering the basic economic problem
3 main types : - Free/market economy
- Planned/Command economy
- Mixed economy
Free/market econ. => Decisions are made largely by private individuals & firms (the private sector).
They decide what and whom to produce for.
e.g.) Levi's & Wranglers have the freedom to produce and sell jeans at whatever price they choose.
Private hospitals would provide health care and they could choose who to treat and how much to charge.
Planned/Command econ. => Decisions are all made by the government (the public sector) makes plans about what to produce, and whom to
produce for. Therefore, resources are allocated by the government through a system of planning.
e.g.) Government would tell what jeans to make and the price.
Government would provide healthcare, probably free.
Mixed econ. => There are 2 parts, Private & Public, they can be in any ratio as long as they are both there.
In this case some decisions are made by private individuals & firms, and some by the government.
Some resources are allocated by the forces of supply and demand, and others by the state planning system.
e.g.) Most leisure and household goods are produced by private firms.
Certain essential sevices are provided free of charge by the government.
3 main types : - Free/market economy
- Planned/Command economy
- Mixed economy
Free/market econ. => Decisions are made largely by private individuals & firms (the private sector).
They decide what and whom to produce for.
e.g.) Levi's & Wranglers have the freedom to produce and sell jeans at whatever price they choose.
Private hospitals would provide health care and they could choose who to treat and how much to charge.
Planned/Command econ. => Decisions are all made by the government (the public sector) makes plans about what to produce, and whom to
produce for. Therefore, resources are allocated by the government through a system of planning.
e.g.) Government would tell what jeans to make and the price.
Government would provide healthcare, probably free.
Mixed econ. => There are 2 parts, Private & Public, they can be in any ratio as long as they are both there.
In this case some decisions are made by private individuals & firms, and some by the government.
Some resources are allocated by the forces of supply and demand, and others by the state planning system.
e.g.) Most leisure and household goods are produced by private firms.
Certain essential sevices are provided free of charge by the government.
Free/Market Econ.
Advantages
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Disadvantages
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Planned/Command Econ.
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Disadvantages
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