Subjects

Economics

Explore Economics
Search

An economic system is a network of organisations used by a society to resolve the basic problem of what, how much, how and for whom to produce

1. Free market economy: Where markets allocate resources through the price mechanism. An increase in demand raises price and encourages businesses to use more resources into the production of that good or service. The quantity of products consumed by people depends on their income and income itself depends on the market value of an individual's work. In a free market economy there is a limited role for the government, indeed in a pure free market system, the government limits itself to protecting property rights of people and businesses using the legal system and protecting the value of money or the value of a currency.

2.Planned or command economy: In a planned or command system associated with a socialist or communist system, scarce resources are owned by the government. The state allocates resources, and sets production targets and growth rates according to its own view of people's wants. Market prices play little or no part in informing resource allocation decisions and queuing rations scarce goods.

3.Mixed economy: In a mixed economy, some resources are owned by the public sector (government) and some are owned by the private sector. The public (or state) sector typically supplies public, quasi-public and merit goods and intervenes in markets to correct perceived market failure. Nearly all economies in the world are mixed although that mix changes over time for example as some industries are privatised (sold to the private sector) or nationalised (taken back into state ownership).

Economic reform - how will Cuba change?
Featured
CPD courses

Teaching Behavioural Economics at A Level

This new course supports colleagues delivering the behavioural economics teaching content for the new AQA A Level Economics specification from September 2015.

Learn more ›

You might also like

Blog posts

Fishing for perfect competition

16th February 2015

Reference material

Study presentations

How Markets Work - Supply Theory

Teaching & learning products

AS Microeconomics Revision Guide

This 48-page, full-colour printed revision guide written by tutor2u's Geoff Riley is designed to support students preparing for their AS Economics exams on microeconomics.

£4.00

AQA A2 Economics Worked Answers (2014)

Exemplar A Grade answers to the ECON3 and ECON4 exam papers sat in June 2014

£5.00

Close

Economics