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Saturday, 18 August 2018

Types of economy

It is very essential for economics readers to know and understand about types of economies and what are the characters of different types of economies. Here the detailed description is given about different types of economies. There are three types of economies:

1. Centrally Planned Economy
2. Free Economy or Market Economy
3. Mixed Economy

Types of Economy
Types of Economy

Let us discuss all types of economies one by one. 

 Centrally Planned Economy

Centrally Planned economy or socialist economy is a type of economy in which all major decisions related with production  how to produce , what to produce and how to produce are taken only by central government. Objective of this type of economy is to promote social welfare. In centrally Planned economy , ownership right of resources is only with government. People are not sovereign as they have not any choices. Only Public sector has total control on this type of economy.

 Free economy (Capitalism)

Free economy or market economy is driven by free forces of market . Demand and supply are considered forces of market. Free force means no intervention of government. Decisions related with production lie in hands of individuals or enterprises. Private sector is allowed to produce freely.  Prices and output is determined by demand and supply movements. Objective of this type of economy is to maximize profit not social welfare. Right of ownership is given to people by government. People can own resources.

  Mixed Economy

Mixed economy is a combined result of centrally Planned and free economy. It has features of both type of economies. some sectors' control lies only in the hands of government and some in the hands of private sector. As in India , Railways, defense are only managed by government. Government tries to fulfill its social welfare objective and private sectors only want to increase profit by increasing production.customer is sovereign in this type of economy. Both private and public sector dominates this economy. Presently nature of economy of India is mixed economy.

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