Q:

What are the four types of economic systems?

A:

Economies worldwide fall into one of four categories: traditional, market, command and mixed. Within these categories, however, there is a considerable amount of variation. The type of economy that a market falls into depends on what it produces, how it produces those goods and who its goods are produced for.

Depending on the type and volume of products produced and overall health of the market, some economies tend to fare better than others. Traditional economic systems are those in which each new generation of business owners, producers and consumers maintains the same level of economic output and productivity as its parents’ and grandparents’ generations. These economies are generally supported by family businesses and trades, and their survival depends on the success of traditional social customs. Good examples are subsistence farming and production of artisanal handicrafts. Market economies, in contrast, revolve around changing consumer needs and spending habits. In these economies, trends and product popularity dictate what goods and services businesses produce and provide. Producers market products based on sound economic decisions, and buyers ultimately set prices. Command economies are those regulated entirely by governments: communism is a prime example. In these economies, markets play little, if any, role in production decisions. Finally, mixed economies contain aspects of both market and command systems. Businesses and the government help each other acquire and distribute resources for optimal economic growth.


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