Economic

Systems
Unit 3
Definition
 An economic system is a mechanism with the help
of which the government plans and allocates
accessible services, resources, and commodities
across the country. Economic systems manage
elements of production, combining wealth, labour,
physical resources, and business people. An
economic system incorporates many companies,
agencies, objects, models, and deciding
procedures.
TYPES OF ECONOMIC SYSTEM
a) capitalism
b) socialism
c) Mixed
Capitalism
 Capitalism is a system of economic organization
characterized by the private ownership and use of
capital with profit motive. It is based on the
doctrine of laissez faire which would mean that the
state interference in economic activity should be
kept down to the minimum.
Features of a Capitalist Economy
 Right to Private Property
 Price Mechanism
 Profit Motive
 Freedom of Enterprise
Socialism
 Socialism is an economic system in which the
means of production (capital equipment, buildings
and land) are owned by the state. It emphasizes on
work according to one’s ability, and equal
opportunities for all regardless of caste, class and
inherited privileges.
Features of a Socialist Economy
 Collective Ownership of Resources
 Central Economic Planning
 No Choice for Consumers
 Equal Distribution of Income
 Absence of Market Forces
Mixed Economic system
In this system, we find the characteristics of both
capitalism and socialism. Both private enterprises
and public enterprises operate mixed economy. The
government intervenes to regulate private enterprises
in several ways.
Features of Mixed Economy
 Coexistence of All Sectors
 Cooperative Sector
 Freedom and Control
 Economic Planning
 Social Welfare