Notes on Economic Systems:Free Market, Command, Mixed

3 Types of EconomiesThe type of economy is determined by the extent of government involvement in economic decision making.

Economy A system of production, consumption, and distribution (a system of buyers and sellers)

Free Market Economy(Also known as a free enterprise system.)NO government involvementPrivate ownership of property and resourcesLots of choice for both business owners and consumersLots of competition between businessesProfit goes directly to individual owners

Free Market EconomyExample:Think of a market placeeveryone is on an equal playing field.Tons of choice.Lots of competitionsellers know that if you do not buy from them, you will buy from someone else

Command EconomyTOTAL government involvementGovernment ownership of property and resourcesCentrally-planned (government planned)Lack of choice for consumersAll profit goes to the governmentNo competition

Command EconomyExample:Command economies include countries such as China, Cuba, and North Korea.

Remember characteristics such as no choice, government-planned, little competition. What would a shoe store look like in a command economy?

Mixed EconomySOME government involvementThis is often still referred to as a market economy, but it is not entirely free.Most common economic system in the world todayGovernment only makes decisions in areas that could affect lots of people

Mixed EconomyExample:The government creates many agencies that oversee businesses in America.FDA (Food and Drug Administration)CPSC (Consumer Product Safety Commission)