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Types of Economic Systems
By Lorelie Ngo, Shane Taggart, and Zarah…
Types of Economic Systems
By Lorelie Ngo, Shane Taggart, and Zarah Maldonado
Market Economy
Example: Gilded Age America
Characteristics:
-Private ownership of property and business
-Consumer and business freedom
-Selfish motives for profit
-Miniscule to no government regulation
-Business rivalry
Advantages:
-Competition increases efficiency
-Innovation thrives
-Market growth attracts foreign business
-Rate of employment increases
Disadvantages:
-Private entities struggle to provide public services
-Large income disparity
-Essential goods may become costly
-Social welfare takes a back seat
-Inflation may occur
-Uncertainty and risk in both businesses and individuals
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Traditional Economy
Example:The Amish
Characteristics of a Traditional Economy
- Economic questions are answered by tradition, habits, and customs.
- Children work the same jobs their parents worked.
- Fear of change.
Advantages:
-No wastage of goods.
-The people are skilled.
-Environmentally friendly.
-Not affected by global recessions or problems.
-Preserves traditions.
Disadvantages:
-Likely to have resource shortage.
-Majorly threatened by natural resource scarcity.
-Miss out on the global trade of cultures and ideas.
-Limited growth opportunity.
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Command Economy
Example: Soviet Union
Characteristics of a Command Economy:
-Large government control
-Resource and budget control and allocation
-No competition
-Private sector (if there is one) must follow government authority
Advantages:
-No interruptions
-Direct utilization of resources
-Mobilization of resources
-Common goal/vision
Disadvantages:
-Complete control to government
-Development of black market
-Lack of understanding in government
-Discourage competition and innovation
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Mixed Economy
Example: United States
Characteristics of a Mixed Economy
- It protects private property
- The market determines the prices
- Its driven by the self intrest of individuals
Advantages:
-Safeguards personal freedoms
-Reduces wealth disparity via more equal opportunities
-Economic upheavals can be avoided
-Promotes fair pricing and distribution of goods
-Poor economies can have a fast and balanced economic development
Disadvantages:
-Market equilibrium is hard to maintain.
-Corruption and nepotism is prevalent.
-Excessive state control will hinder private markets and industries.
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