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2 ECONOMIC SYSTEMS: KINDS AND FEATURES

1 The main elements of economic system.
2 Traditional economy.
3 Capitalist economy.
4 Socialist economy.
5 Mixed economy.

Key words: economic system, traditional economy, Capitalist economy,
Socialist economy, Mixed economy

An economic system is a way of answering these basic questions. Different
economic systems answer the above questions differently. An economic system refers
to how the different economic elements will solve the central problems of an
economy: what, how and for whom to produce.
Economic system consists of the following elements:
1) the productive forces (land, labor, entrepreneurial ability, capital);
2 technical and economic relations;
3 industrial Relations or property relations. Who owns the factors of production;
4 the economic mechanism. This is a law, market infrastructure and so on.

I Traditional Economy.
In traditional economy, the basic problems are solved by traditions and custom
rules every aspect of behaviour. It produces exactly to its consumption requirements.
It is a subsistence economy. There is not much of sales as there is only small scale
production. The same product will be produced by every generation. The production
techniques are traditional.

II Capitalist Economy.
A capitalist economy is an economic system in which the production and
distribution of commodities take place through the mechanism of free markets.
The salient features of capitalism are:
1 Right to Private Property;
2 Profit-Motive:
3 Freedom of Choice:
4 Market Forces:
5 Minimal role of Government:
Advantages of Capitalist Economy:
increase in productivity; maximizes the Welfare; flexible system; non-interference
of the State; low cost and qualitative products; technological improvement.
Disadvantages of Capitalist Economy:
inequalities; leads to Monopoly; depression; mechanisation and automation; welfare
ignored; exploitation of Labour; basic social needs are ignored.

III Socialist Economy.

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