Types of Economies

What is an Economy? An economy is a system in which people make, exchange, and use things that have value.

Major players in the Economy There are Two Types of People in Economies Producers Consumers

Market Economy – Individual Ownership  This is when individual people own most of the businesses and things made by the business.  This can also be known as Capitalism or free-market economy.

 America and Canada have mostly private ownership The United States has somewhat of a mixed economy, but it is closer to a pure market economy than any other country in the Western world.

Command Economy: Government Ownership  The government owns the businesses and determines the prices you would pay for goods and services.  Communism is an economy in which Governments owns the businesses.

 China is a communist country with government ownership of business.

Mixed Ownership  This is an economy that has some parts of business owned by the government and other parts owned by the people.  Most countries fall under this category.  Most democratic countries, including the United Kingdom, have mixed economies. The United States has somewhat of a mixed economy, but it is closer to a pure market economy than any other country in the Western world. The term mixed economy is generally only used when an economy has reasonably significant portions of both government owned and independent owned.

 For Example in the United States the government owns schools, police, roads, fire stations, and prisons.  But individual people can own their own factory or store.

Traditional Economy  The first type of economy.  People grow their own food and trade any surplus they have for their other needs.  Still common in agricultural areas of Latin America, Africa, and Asia

It doesn’t matter what type of economy it is, they all ask the same 4 questions:  What should be produced?  How will it be produced?  How will it be distributed?  Who will receive the benefits of production?