Economy- Meaning & Types- EconomicSea

 According to A.J. Brown, "An economy is a system by which people make a living." In general terms, the economy is a system where all economic activities are carrying out for earning a living.

The sole purpose of any economy is to satisfy human needs by utilizing the scarce resources available in the economy.

Types Of Economies

There are basically four types of economies or economic systems:

1.         Traditional Economy

2.         Centrally Planned Economy Or Socialist Economy

3.         Market Economy Or Capitalist Economy Or Free Economy

4.         Mixed Economy

Now, we will discuss them in detail.

1.         Traditional Economy

•          As the name suggests, it is based on ancient rules and a very basic type of economy.

•          It is a system in which the economy operates on an old-fashioned model, for example, agriculture, hunting, fishing, and gathering. It is built on traditions, customs, and beliefs.

•          There is hardly any surplus or deficit in this type of economy, which means that all resources are fully utilized.

•          As a medium of exchange, they use barter instead of money.

2.         Centrally Planned Economy Or Socialist Economy

•          In this economy, all important decisions related to productive economic activities (production, consumption of goods and services) are taken by the government.

•          It is also called Socialist Economy or Command Economy.

•          The promoter of Planned Economy argues that in a free market, monopolist exploits consumers.

•          In this economy, Prices are usually set by price controls rather than demand and supply of goods and services.

•          Centrally Planned Economy associated with greater political pressure.

3.         Market Economy Or Capitalist Economy Or Free Economy

•          A market economy or a free economy is the opposite of a socialist economy.

•          In this economy, all economic activities are controlled by market forces (demand and supply of goods and services).

•          It is also known as a capitalist economy.

•          Simply put, in free markets, tariffs, quotas, taxes, and other interventions are minimal or non-existent.

4.         Mixed Economy

•          A mixed economy is a combination of both a centrally planned economy and a free market economy.

•          In this economy, economic activities are controlled by demand and supply but the market is regulated by the government. So, it has characteristics of both economies.

•          It is also known as the dual economy.

•          India is also considered a Mixed Economy.

•          Existence of Both Private and Public Sectors. Some sensitive areas are controlled by the Government for the welfare of the citizens. For example, transportation, defense, etc. And Private Industries have the freedom to operate their business.