Q.Describe the different types of economic systems.

Economies are organised as capitalist (market), socialist (planned) or mixed systems, differing in who owns resources and how decisions are taken.

An economic system is the way a country organises the ownership of resources and takes the basic decisions of what, how and for whom to produce. There are three broad types:

1. Capitalist economy (Market economy):
   • Means of production are privately owned.
   • The profit motive and the free-market price mechanism guide production and distribution.
   • Minimum government interference; consumer sovereignty prevails. (e.g., USA)
2. Socialist economy (Planned economy):
   • Means of production are owned and controlled by the State.
   • Economic decisions are taken by a central planning authority for social welfare, not profit.
   • Little role for the price mechanism. (e.g., former USSR)
3. Mixed economy:
   • Both private and public sectors coexist. …