An economic system is a mechanism which deals with the production, distribution and consumption of goods and services in a particular society.
The economic system is composed of people, institutions and their relationships. It adresses the problems of economics like the allocation and scarcity of the resources.
The division of economic systems
There are several basic questions that must be answered in order to resolve the problems of economics satisfactorily. For example, the scarcity problem requires answers: what to produce, how to produce it, and who should get what is produced. An economic system is thus a way of answering these basic questions. Different economic systems answer them differently.
Please note that there is often a strong correlation between certain ideologies, political systems and certain economic systems (for example, consider the meanings of the term "communism"). Many economic system overlap each other in various areas (for example, the term "mixed economy" can be argued to include elements from various systems). There are also various mutually exclusive hierarchical categorizations.
The four most basic and general economic systems are:
- Market economy (the basis for several "right-wing" systems, such as capitalism)
- Mixed economy (arguably the "centrist" economic system)
- Planned economy (the basis for several "left-wing" systems, such as socialism)
- Traditional economy (a generic term for the oldest and traditional economic systems)
An economic system can be considered a part of the social system and hierarchically equal to law system, political system, cultural system, etc.
Please see list of economic systems for other possible categorizations of economic systems, as well as detailed lists with many subcategories.
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