American Public University
There are three mainstream economic systems: 1-Traditional economies, 2-Command economies, and 3-Market economies (Hipple, 2016). Each system has different characteristics, and it is not possible to classify the economies in the three economic systems in particular borders. The economies might carry certain features from the various economic systems (OpenStax College, 2016).
The traditional economies are driven by the traditional life principles. The main production activity is agricultural production, and many of the companies belong to the families. The traditional rules have the highest level of importance in the traditional economies. Due to the traditional living, innovations do not receive enough importance. Continuing the regular traditional economic life is the main objective among the agents in the economy.
The command economic system is based on the management of the economy by a group of pioneering people which is called as central government. The central government develops the vision and the mission of the economy and assigns tasks to every agent. The central government develops a development plan covering certain time intervals, and every economic activity is controlled by the central government. Therefore, the central government decides how to produce, what to produce, how much to produce, and what role every individual is required to take in the economy.
The market economic system is based on the markets working under the perfect competition conditions. All the buyers and the sellers meet in the markets, and they make agreements related to the economic production and the trade. The market mechanism defines all the answers in the economic activities. After the prices are determined in the free markets, no one or no group cannot influence the price. The free market system develops the suitable conditions for everybody, and it guarantees the balance in the economy.
References
Hipple, F. (2016). The Economic Problem and Economic Systems. Faculty.etsu.edu. Retrieved 17 June 2016, from http://faculty.etsu.edu/hipples/ProbSys.htm
OpenStax College,. (2016). Microeconomics (1st ed., pp. 15-17). Texas, US: Rice University. Retrieved from https://s3.amazonaws.com/books.koondis.com/textbooks/samples/Microeconomics.pdf
