NAME : KHALID UR REHMAN
ROLL NO: 46
TYPES OF ECONOMIC SYSTEM
TYPES OF ECONOMIC SYSTEM
Economic system:
An economic system, or economic order, is a system of production, resource allocation and distribution of goods and servics within a society manner:ive
geographic area.
Three major types of economic system are :
1. Capitalist economy
2. Socialist economy
3. Mixed economy
• Capitalist Economy:
• A capitalist economy is the one in which the means of production are owned,controlled and operated by the private [Link]
Socialist
• Production are done mainly for earning profits.
• The central problems (what ,how and for whom to produce) are solved through market forces of demand and supply.
• The three central problems are solved in the following manner:
1) What to produce : Under this system only those goods are produced that can be sold profitably either in the domestic or in the fore
markets.
2) HOW TO PRODUCE:
• Goods are produced using cheaper techniques of production.
• In Case of cheapear labor intensive methods of production are used
and in case of costly labor , capital intensive methods of production are
used.
3) FOR WHOM TO PRODUCE:
• In a capitalist society goods produced are distributed among people not
on the basis of their needs but on the basis of their income or
purchasing power.
Note: Capitalist economy does not focus on the welfare of the
society but on the self interest and earnings of profits.
SOCIALIST ECONOMY
Socialist economy is the one in which the meand
of production are owned ,controlled and
operated by the government.
The Three Central Problems Are Solved In the
Following Manner:
1. What to produce
2. How to produce
3. For whom to produce
A) WHAT TO PRODUCE:
In a socialist society the government decides what to produce in accordance with the needs of the society
B) How to produce:
The government decides how the goods are to be produced.
C) For Whom to produce:
1. Distribution under socialism is supposed to be based on what people need and not what they can afford
to purchase
2. The motive of this system is the welfare of the society as a whole
3) Mixed economy :
A mixed economic system refers to a system in which the public sector and the private sector are
allotted their respective roles for solving the central problems of the economy
• In mixed economy the government and the market together solve the central problems.
• The private sector provides whatever goods and services ,it can produce well and thus government
provides essential goods and services which the market fails to do .
