Economic systems and the role of the market

Economic System : the way in which production is organised in a country or group of countries.
This is the term, which describes that country's people, organisations and government always have to make dicisions with respecct to:
- What to produce?
- How to produce?
- Who gets it?

There are 3 main types of economic system:
-market economy
-command economy or centrally planned economy 
-mixed economy


Market economy ia an economic system whereby resources are allocated through the market forces of demand and supply. Here, price and the free operations of the price system are central to the way in which resources are allocated.
Price system is a method of allocating resources by the free movement of prices.


Command economy is an economic system in which most resourses are state owned and also allocated centrally.

Mixed economy is an economic system in which resources are allocated through a mixture of the market and direct public sector involvement.