MARKET ECONOMY, Associated with Adam Smith, Government stays out of economic matters, Firms produce goods and services according to supply and demand, Consumers are free to buy whatever they choose, Also called free market, Run by the "invisible hand", Competition and profit drive everything, Can lead to unfair business practices, "Laissez-faire" (hands-off), COMMAND ECONOMY, Associated with Karl Marx, Also known as a centrally planned economy, Supply and demand have little effect on production, Citizens have very little freedom and no private property, Government determines what will be produced and who will produce it, People have little incentive to be efficient or innovative, Role of consumers is very limited, Often associated with Communism, Often results in shortages and surpluses, MIXED ECONOMY, Government steps in when needed to regulate certain parts of the economy, Firms can produce according to supply and demand but must follow government regulations, Consumers are free to buy what they choose but are subject to government regulations, Most flexible with some government intervention, Government steps in occasionally to make competition more fair, Most countries, including the U.S. have this type, TRADITIONAL ECONOMY, Revolves around family, Tends to remain stagnant and resistant to change, Custom, ritual, or habit determine what is produced, Communities typically have a low standard of living and lack modern conveniences, Particularly vulnerable to environmental disasters, Often rural and farm-based

Economic Systems

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