Types of Economies

Types of Economies

The division of economies across the world is done according to the involvement of the government in the economic decision making of the country.

» Capitalist Economy

❖ Capitalism can be understood as the economic system wherein private or corporate ownership is encouraged.
❖ It involves a system of free enterprise where there is no interference of the government in the economy. The basic laws of supply and demand are responsible for an efficient economy which shall cater lo the needs of the people.
❖ The main characteristic of this economy is that competition regulates the market, meaning that there is rivalry in supply or getting a services or goods.

» Socialist Economy

❖ In the socialist economy, there is a system wherein the methods of production are owned by the State which is used to satisfy human needs instead of generating profits.

» Communist Economy

❖ Where on the one hand, a socialist economy gave emphasis to the collective ownership of the State (property and assets), similarly, on the other hand, it attributed a large role to the State in running the economy.
❖ In a communist economy, however, there is State ownership of all the property including labour with absolute power of the State to run the economy.

» Mixed Economy

❖ In a mixed economy, there is a combination of public sector and private sector units.
❖ In this kind of economy, the government makes the decisions for the public sector units whereas the businessmen make the decisions for the sector units.