Economic Systems

On class we studied the different types of economic systems that have existed.

All talk about the level of control in a country.

The first one we studied is the commanded or planned economy

In this one the government controls the prices, the state control the resources and is basically described as controlled. Consumption and investment, matching of inputs and outputs, and distribution of the output is planned. And it has also its advantages, which are a high and stable growth, social goals pursue, high investment and low employment. Still it is expensive to administer, insufficient allocation of resources, it has problems gathering information, there are inappropriate incentives and it lack of respond to the consumer demand.

The free market economy

Is the one where the prices are set by the market and resources by individuals and firms. It is basically described as choice with free decision

This one has also benefits, it transmits information between sellers and buyers, there is no need for costly bureaucracy, incentives are efficient and there are competitive markets that respons to the consumer wishes.

The problems are that the competition could be limited, inequality exists and the environmental and social goals may be ignored.

Finally we have the mixed economy

Combines a little bit of both at any proportion. It uses taxes, subsidies and benefits. there is legislation and regulation, and there is a direct provision by the government.