Vedaniti, eam UNE OnlineVedaniti, eam UNE Online Economic System Definition Economic systems are the means that are adopted by governments of respective countries for distribution of resources along with services and goods. Such an arrangement is dependent on production factors - capital, labour, physical resources, entrepreneurs, and information resources. Types of Economy There are four types of economic systems - 1. Traditional Economic System This economic system retains essential characteristics in which there is very less specialisation or division of labour. A traditional economic system is most likely to be found in rural settings, or in such developing nations where farming is predominant. Such settings usually have very few resources to share 2. Command Economic System Command or Socialist economic system has a dominant centralised authority in the form of government. The economy in such a country is controlled by the government. It is the sole decision-making authority for determining production and allocation. Ideally, the command system takes into consideration the best interest of its populace.Vedaniti, eam UNE Online 3. Market Economic System Market economic system or capitalist economy involves very less government interference and incorporates the principles of the free market. There is a scant exercise of control over resources. Market forces regulate demand and supply. However, there does exist some degree of government intervention in the form of regulations against monopoly, and in favour of fair trade. 4. Mixed Economic System A mixed economic system combines the features of both socialist and free-market economic systems. It is also known as dual systems. Most of the countries today have a mixed economic system with the existence of both public services as well as private industries. Do you know? Economic liberalisation in India was initiated in 1991, and Dr ManMohan Singh was the pioneer of this liberalisation. In economic liberalisation, government restrictions and regulations are reduced to facilitate the participation of private entities to a much greater extent. It is an inherent principle in Classical Liberalism. "Controls" were removed to drive economic development, which was in arocky state. The liberalisation of the Indian economy provided access to foreign investors, which subsequently increased foreign trade. Such changes went on to create higher job opportunities for the people of India. Difference between Types of Economy Parameters Market Economic | Command Mixed Economic System Economic System ‘System Determination of | Demand and The central Price is price supply ina authority, most _ | influenced by market determine | likelv the market forces ofgovernment, decides prices of goods and services Vedaniti, Lear UNE Online demand and supply as well as government regulations, in certain instances Property Ownership vests | Thereis public | Property is ownership with private ownership of owned by both entities property public and private entities Production Productions | Theunderlying | Production in a undertaken only | objective of mixed economy with a profit production is includes both motive social welfare —_| profit motive and social welfare Competition There exists There is no Only entities in competition competition ina | private sector among entities | market owing to | experience present in such | State ownership | competition market of firms. Government Governmenthas | The government | Government has intervention very less role to | retains full a full holding in play in amarket economic system control over firms the public sector buta limited role in its private counterpart Economic SectorsVedaniti, eam UNE Online These can be categorised into the following — 1. Primary Sector Primary sector in an economy has a direct interface with the environment for purposes of production. Instances of the primary sector are agriculture, farming, mining, and fishing, among others. Importance of the primary sector relates to the harvesting of products or extraction from the environment for procuring basic food and raw material. The end purpose of the primary sector is to utilise natural resources optimally. 2. Secondary Sector In the secondary sector of an economy, raw materials are converted into products that are fit for both consumption or sale and helps to move away from a primitive economic system. For example, the secondary sector helps a country to move from agriculture or other similar activities towards a developing market. In India, the secondary sector holds about 20% of gross domestic product. It helps to provide greater job opportunities to the populace at large. 3. Tertiary Sector The Tertiary sector primarily covers the service sector, and therefore, focuses on service exchanges and production. Examples of the tertiary sector are - insurance, banking, communication and transportation, among others. The tertiary sector's significance is on the rise due to rapid technological developments in various basic essential services. These basic services include healthcare, police, bankina,