U. S. Government/Characteristics of Different Economic Types
Three basic questions of economics
- What will be produced?
- Who will produce it?
- For whom will it be produced?
Each type of economy answers the three basic questions differently.
Traditional economy
[edit | edit source]- Economic decisions are based on customs that have been going on for decades.
- People often perform the same type of work as their ancestors did.
Free market economy
[edit | edit source]- Private ownership of property/resources
- Profit motive
- Competition - Rivalry between producers/sellers; results in better quality and lower prices
- Consumer sovereignty - Consumers determine through purchases what will be produced
- Individual choice
- Minimal government involvement in the economy
Command economy
[edit | edit source]- Central ownership (usually by government) of property/resources
- Centrally planned economy
- Lack of consumer choice
Mixed economy
[edit | edit source]- Individuals and businesses are owners and decision makers for the private sector.
- Government is owner and decision maker for the public sector.
- Government's role is greater than in a free market economy, but less than in a command economy.
- Most ecomines today, including the US, are mixed economies.