ECONOMIC SYSTEM

An economic system refers to a set of economic institutions

that dominate a given economy with the main objective of
solving the basic economic problems.

Four kinds Economic System

1. Traditional Economy

Is one whose economic decisions are made with great

influence from the past
Characteristics of Traditional Economy

1. Communal land ownership;

2. The leader decides on the management of agricultural
production which is the basis of the economy;
3. The production, distribution, and use of economic
resources are based on traditional practices;
4. New technologies are not welcome
5. The economy is only its third priority while culture and
religion are its foremost priorities; and
6. Mines are used to gather raw materials for production.
 2. Free-market economy or Capitalism

an economic system in which individuals, rather than

government, make the majority of decisions regarding
economic activities and transactions.
Characteristics of Free Market Economy
 the private sector owns and manages the means of
production;

 the prices system in a market structure applies to

determine how much will be paid for a certain
commodity or service;

 free enterprise;

 There is a minimum government interference on

decisions pertaining to the management of the
economy;

 Existence of competition often results to

monopoly; and

 There is the presence of economic power

 3. Planned or Command Economy

Economic system in which the production and distribution of

the wealth of a country are entirely or mainly controlled
by the government.

Characteristics of Command Economies

State dictates economic policies

Central allocation of resources

No individual freedom

Economic reward for obedience to state laws

No private property/no private business

State control of trade, domestic retailing marketing

and distribution

No foreign investors or visitors

Travel ban on citizens

3. Mixed economies or mixed capital and mixed socialist system

Characteristics of mixed economies

State regulation of capital, labor, trade, etc.

Guaranteed individual rights and freedom

Reward according to work, talent, or skills.