Economic Systems

There is more than one way for an economy to organize its economy. The government may decide what’s best or the government might stay out of it, leaving the economic system- structure of methods and principles that a society uses to produce and distribute goods and services- to be determined by the combined decisions of millions of individual people. Economic system is defined as how a society chooses to produce, distribute, and consume goods and services. Since resources are scarce and not always available each society must determine three important factors when determining their economic system. These factors are how the goods will be produced, who will produce these goods, and for whom these goods will be produced for. Society must use the resources they have available for the allocation of these goods. Because each society is different and does not produce, distribute, or consume the same goods and services, each society in the economic system is categorized into four different types of economies. These economies are known as traditional, market, command, or mixed economies. Traditional economy is shaped mainly by traditions, customs, and beliefs of the community. In a market economy decisions are determined by a free market. A command economy is an economy controlled by the government who regulates the supply and prices of the goods and services produced. The mixed economy is where both the private sector and the government make the decisions on what goods and services are produced, how they will be produced, and who will produce them.

One type of the economic system is the traditional economy. In a traditional economy goods and services are developed based on the traditions, customs, and beliefs of the society. This type of economy is an underdeveloped economy because of the use of primitive tools and methods the society uses to produce these goods and services. Most traditional economies use hunting and fishing to sustain their community and produce very