Anti Essays, your source for free research papers, essays, and term paper examples. An economic system is very important in every country of the world, without it the country would be a disaster and maybe anarchy might take control of the country. The nations must take tough decisions to make the country’s economy work efficiently, to achieve this purpose they must answer the three questions, what to produce, how to produce, and for whom to reduce.
An economic system reflects the process a nation follows to produce goods and services. There are four types of economic systems: traditional, command, market, and mixed. Nowadays there are no pure economics such as pure traditional, command, or market, they are all mixed due to needs and wants and every economy is a little bit different. A traditional economy is based on custom and tradition, for example on religious beliefs developed by the group ancestors.
Command economy lies on government officials to answer the three basic economic questions. The officials have the power to decide what products will be produced. Market economy the individuals answer the three basic questions; the government can’t say anything to the producers. A market is the free exchange of goods and services and this is how the market economy is based on. The market economy is backed up with the people in having self-interest, which is the impulse that encourages people to fulfill their needs and wants.
There are also incentives that are things that encourage you to behave in a particular way; this helps a lot to manage more efficiently the economic system. A mixed economy combines the elements of traditional, market, and command economic models to answer the three basic questions. There are three types of mixed economies, an authoritarian socialism or communism in which the government controls nearly all the factors of production. In capitalism, individuals own factors of production and answer the questions. Economic Systems By Danishes