What is an Economic System?

Because of the fact that there is scarcity of resources and unlimited wants, it is always a problem to allocate resources in an efficient manner. We are constantly facing three basic questions. These are:

  • What to produce?
  • How to produce?
  • For whom do we produce?

Every community or country must choose and develop its own way of solving these problems. The way a country decides what to produce, how to produce and for whom to produce is called it Economic System.
The three Economic Systems existing are:

  • Market Economic system
  • Planned Economic System
  • Mixed Economic System

Note:

  • There are no PURE command economies
  • There are no PURE market economies
  • Instead there is a continuum of different characteristics

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