2015-06-30
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An economic system is the way in which a country uses its available resources (land, workers, natural resources, machinery) to satisfy the demands of its inhabitants for goods and services. There are three main economic systems: planned economics, market economics, mixed economics.
Planned economics are economics with large amount of central planning and direction, when the government takes all the decisions, the government decides production and consumption, the government owns all the major productive resources. Changes in demand are difficult to predict, that's why some products are overproduced, the other ones are underproduced. Delays and queues are typical features of planned economics. The former USSR and some other eastern bloc countries are examples of countries where government decision were dominant.
In a true market economy the government plays no role in the management of the economy. The system is based on private enterprise with private ownership of the means of production and private supplies of capital. Workers are paid wages by employers according to how skilled they are and how many firms wish to employ them. Consumers spend more on products and services which they like. In a market economy it is consumer who decides what is to be produced. Consumers pay high prices for products they like. The economy adjusts automatically to meet changing demands.
A mixed economy contains elements of both market and planned economies. It lies between the two extremes of command and market economies. In mixed economies some resources are controlled by the government while others are used in response to the demands of consumers. Practically, all the economies of the world are mixed. For example, Hong Kong has some state-controlled industry, while Cuba has some privately owned and controlled firms. In a mixed economy the government and the private sector interact in solving economic problems. The U.K. is a mixed economy: some services are provided by the state (health care and defence) while a number of privately owned enterprises offer other goods and services.
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