Major types of economies in the world and their functions

icv By icv, 6th Jun 2013 | Follow this author | RSS Feed
Posted in Wikinut>Writing>Essays

this article describe briefly about different types of economies in the world and their major functions. when you are a new to economics it is easy to understand.

An brief note about economic system and functions

Economics is the field of knowledge dealing with the wealth and so many other social matters. We can consider world as a greatest example for an economy. Where we can see many activities like production, distribution, exchange, consumption etc.

Any way when we analyze and compare different countries, we can not see similar economies in structure or in function. Actually the form of economies vary from one country to another country. When we analyze economies, we can see different types of economies. Mainly, in the world we can see three types of economies. Namely….

1 - capitalist economies
2 - socialist economies and
3 - mixed economy.

What is capitalist economy ?

In an capitalist economy the private sector plays a vital role. Where the role of government is very less. Investment, production and other major activities are performing by the private sector. In an capitalist economy problems are solved by the market and there exist price mechanism.

What is socialist economies ?

Socialism is another type of economy in the world. In socialism government sector plays a vital role in the country than others. The government actively promote production, distribution and invest. In such an economy all issues are solved through the planning mechanism. So this kind of economies are also known as centrally planned economies. There is any more role for the private sector.

What is mixed economy ?

It is another type of economy, where we can see the presence of both the private and public sector. In an mixed economy some time private sector may operate with the public sector. Now, it is the time to discuss about the functions of economic system

Function of economic system

All types of economies are performing many different functions. Here I am sharing you some common functions by an economic system. Some times same function may perform by different economies, the way is different. Now, read the functions of economic system provided below.

1 – What produce in what quantity and for whom ?

Actually this is the basic problem each economic system should answer. First of all the economy should find out the demand of commodities and by determine what should produce and in which quantity. For this the economic system should utilize maximum and possible use of the available resources.

2 – How to produce ?

This is another issue the economic system should answer. All the countries can be classified in to two. Labor rich country and capital rich country. So, the economic system should answer which technology is better. In a high populated country labor intensive technology is more suitable.

3 – How to allocate available resources ?

In an economy, there contain many economic resources including resources like natural, human, capital etc. The economic system should determine which resources are utilized to get maximum benefits. The optimum and possible utilization of the available resources should be the policy of economic system.

4 – Growth of resources and economic growth

Each economic system should try to attain growth. It can be boost through the growth of resources. The per capita income in a country showing the growth of the country. growth can attain by the optimum utilization of the available resources.

5 – Rationing of the national output

Every economies producing its output continually. The better distribution of the output or commodities should be the policy of the economic system. When the economic system is performing rationally the distribution of output, they can boost not only growth but development also.


Economic And Social Issues, Economic Devolopment, Economic Issues, Economic Theory, Economics, Economy

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author avatar icv
I am from India, Kerala. I am interesting in writing articles. Here I will share articles related to Economics, Banking and other general topics with you .... read

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