Introduction to Economic Systems
Economic systems refer to the structure and methods a society uses to produce, distribute, and consume goods and services. The major types of economic systems are:
- Traditional Economy – Based on customs, traditions, and barter systems.
- Command Economy – Controlled by the government; examples include socialism and communism.
- Market Economy – Driven by supply and demand with minimal government intervention.
- Mixed Economy – A blend of market and command economies, balancing private and public sector roles.
Understanding Market Systems
Markets are platforms where buyers and sellers interact to exchange goods and services. There are different types of market structures:
✅ Perfect Competition – Many small firms, identical products, and easy entry.
✅ Monopoly – A single producer dominates the market, restricting competition.
✅ Oligopoly – A few large firms control the market, leading to limited competition.
✅ Monopolistic Competition – Many firms selling differentiated products.
Key Features of a Market Economy
✔️ Private ownership of businesses
✔️ Consumer choice determines production
✔️ Price mechanism regulates supply & demand
✔️ Profit-driven economy
✔️ Minimal government control
Advantages & Disadvantages of Market Economy
✅ Pros:
- Encourages innovation and efficiency
- Higher consumer choices
- Competition leads to better quality
❌ Cons:
- Wealth inequality
- Can lead to market failures
- Exploitation of resources
