U. S. Government/Characteristics of Different Economic Types

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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.