Economic Systems

Different Economic Systems in the World

• In some places, it is the government that decides the answers to the three big questions. In this case the society has a Command Economy. The government decides what will be produced, how it will be produced, what the price will be, etc. The countries that were once part of the Soviet Union (until 1991) had a command economy. By 2002, only North Korea and Cuba had tightly controlled command economies, while China had an economic system that is based in part on command and in some industries on free market principles. Iron and steel, cement, and transportation manufacturing are mainly command economies, while clothing, televisions and other electronics, and food are largely based on principles of a market economy.
• In some places, the three big questions are answered by tradition or custom. In other words, people produce what they have always produced in the way that they have always produced it. This is called a Traditional Economy. Some rural villages in regions of Africa, Latin America, and Asia have this type of economy.
• The United States has a Market Economy. In this type of economy the three big questions are answered through the interaction of producers and consumers. The seller expects to charge as much as the buyer is willing to pay without looking for another seller and a less expensive price. The buyer expects to make economic choices based on price, quality, availability, appearance, etc.