Briefly speaking, economic system is the way in which a country manages the production and distribution of goods and services. Each nation and society must make choices and decisions based upon their own values.
Economic systems are divided up into three basic types. These types are:
- Traditional Economic System
- Market Economic System
- Command Economic System
1.TRADITIONAL ECONOMIC SYSTEM- What is produced and what each person does is determined by birth. A person might be expected to do what his father did. The share of wealth is determined by custom or one’s position in society.There are traditional economies that exist today in parts of Asia, the Middle East, Africa and Latin America.
2- MARKET ECONOMIC SYSTEM- What is produced and what each person does is based on the activity within the market. Buyers and sellers decide for themselves what goods and services will be produced. Individuals decide for themselves the answers to the basic economic questions. The United States is classified as a market economy.
3- COMMAND ECONOMIC SYSTEM- the individual has very little say as to how the basic
economic questions are answered. What is produced and what each person does might be determined by a small group of individuals. The product might be the property of the small group in control or shared with others. The People’s Republic of China ,Uganda and the Soviet Union are examples of command economies, although, most of these nations have gradually moved toward a limited market economy.
