Economic Systems

Topics: Economic system, Mixed economy, Market economy Pages: 7 (2345 words) Published: October 13, 2014
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 little surplus of goods. If any society does have a surplus of goods these are often given to the landowner or a person of higher authority. This resulting is minimal economic growth. Traditional economies are found in rural regions and are industrialized. Most of these regions are located in the third world regions of Africa, Asia, Latin America, and the Middle East.

Traditional economies answer the questions of what goods and services are produced, how these goods and services will be produced, and who will consume these goods and services by the traditions, customs, and beliefs of the community. Traditions are usually formed and remain unchanged, therefore offering little opportunity for growth. Goods and services produced in this type of economy are usually hunting, fishing, and ones that can be produced using the land available (Amadeo). In this society every person has a specific job to do for the production of these goods and services. The amount they produce is only enough to keep their society alive. They do not produce for growth or wealth. Money is not needed in this economy because these societies use barter and trade for the distribution of their goods. This society makes their own clothes and tools.

There are two levels of traditional economies, basic and next. In the basic level the society is nomadic and lives in families or tribes. Most cover a large area and usually follow the animals to find food. They move to follow the weather. In the next level , the society will find land and become farmers where they are able to plant and grow food to sustain them. They are able to support more people in the society and build homes to live in. Here they can trade and barter good and services instead of competing for them. A true traditional economy does not exist in today's society, although there are many in third world countries that could be considered traditional economies. This is because most live in poverty with no means of escaping it. War...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about Economic Systems
  • The Difference Between Market, Mixed and Economic System Research Paper
  • Economics Scarcity Essay
  • Mixed Economics Research Paper
  • China Economic Transition Essay
  • Arguments in Favor of a Free-Market System of Resource Allocation Essay
  • Essay about economic system
  • Economic System Essay

Become a StudyMode Member

Sign Up - It's Free