It is defined as “a set of customs, laws, rules and regulations governing the production, distribution, exchange and consumption of goods and services”. Countries used the economic system to solve the four basic economic problems.
There are four economic systems and the differences between various types depend on the following ways:
- Ownership and control
- Profit motive
- Freedom of choice and enterprise
- Government intervention
- Allocation of resources
The main economic systems are:
- Subsistence or traditional
- Free enterprise or capitalist or market
- State planned or command
- Mixed economic system
- Traditional or Subsistence Economic System
It values a strong belief in customs and traditional values of the people in the community. The family or individual produce goods and services just enough for family consumption. No financial exchange is involved.
The basic economic problems of what to produce, how to produce, where to produce and for whom to produce were made in the ancient past. It is believed that any attempt
- The Market Economic System (Capitalist, Free Enterprise, Laissez-Faire or Decentralized Economy)
- State Planned Economic System (Command, Socialist or Centralized Enterprise)
- Mixed Economic System
