Economic Systems

Definition

Economic systems refer to the way societies organize their production, distribution, and consumption of goods and services.

Analogy

Think of economic systems as different types of recipes for baking a cake. Each recipe has its own set of ingredients (resources), instructions (rules), and outcome (economic outcomes). Just like there are various ways to bake a cake, there are different economic systems such as capitalism, socialism, and mixed economies.

Related terms

Command Economy: An economic system where all decisions regarding production and distribution are made by a central authority or government.

Market Economy: An economic system where most decisions about production and distribution are made by individuals or businesses based on supply and demand.

Traditional Economy: An economic system where customs and traditions determine what is produced and consumed within a society.