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Three Types of Economies

Market Economy

a market economy is an economy in which the prices of goods and services are determined in a free price system.This is often contrasted with a state-directed or planned economy.

advantages

free market economy gives consumers a choice

brings out competiviness among suppliers

suppliers tend to be innovative to be viable on

the market

dISADVANTAGES

Underconsumptions of merit goods

overconsumptions of demerit goods

absence of public goods

who makes decisions?

the consumer

examples

the u.s.

Traditional Economy

This type of economy ensures that every member of society has a purpose and as well, a participatory function in society. In other words, each person has a certain activity or job.

advantages

knows who they are and what

dobs are

strong social government

based on method & tools

disadvantages

not much economic growth & development

very little social mobility

limiting choices for consumers

who makes decisions?

everybody does because the head court

died & the people then decided to make

it an official economy

examples

most african countries & some asian countries

command economy, also called planned economy, is directly controlled by the government. The state owns all property and controls all resources including land, labor, and capital in a command economy. Allocations of resources, supply, and price are regulated through central planning.

Command economy

advantages

maximizes the countries utilization of resources

distributes wealth equally among all people

only produces goods that are required for maintaining life

disadvantages

lack innovation

consumer demands are not met

can not detect consumer preferences accurately

who makes decisions?

the central government

examples

Cuba, North Korea, China, & the Soviet Union

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