The Four Types of Economic Systems:
As you probably know, there
are countless economies across the world. All of them are unique in their own
way, but they still share a significant number of characteristics. Thus,
we can categorize them into four types of economic systems;
traditional economies, command economies, market economies and mixed economies.
All of them rely on a different set of assumptions and conditions and of
course, they all have their own strengths and weaknesses. We will look at each
of them in more detail below.
1-Traditional Economic System
A traditional economic
system focuses exclusively on goods and services that are directly related
to its beliefs, customs, and traditions. It relies heavily on individuals and
doesn’t usually show a significant degree of specialization and division of
labor. In other words, traditional economic systems are the most basic and
ancient type of economies.
roles are set.
predictable, and continuous.
Lower standard of living.
A mixed economic system refers to any kind of mixture
of a market and a command economic system. It is sometimes also referred to as
a dual economy. Although there is no clear-cut definition of a mixed economic
system, in most cases the term is used to describe market economies with a
strong regulatory oversight and government control in specific areas (e.g.
public goods and services).
A command economic system is characterized by a
dominant centralized power (usually the government) that controls a large part
of all economic activity. This type of economy is most commonly found in
communist countries. It is sometimes also referred to as a planned economic
system, because most production decisions are made by the government (i.e.
planned) and there is no free market at play.
Basic Needs taken care of.
Education, public health, other services cost very
little if anything.
Very little unemployment.
Doesn’t meet wants.
Requires a large bureaucracy.
New and different ideas are
No room for individuality.
A market economic system relies on free markets and
does not allow any kind of government involvement in the economy. In this
system, the government does not control any resources or other relevant
economic segments. Instead, the entire system is regulated by the people
and the law of supply and demand.
Individual Freedom for all.
Lack of government interference.
Incredible variety to choose from.
High degree of consumer satisfaction.
Rewards only productive people.
Workers and businesses face
Not enough public goods (Education,
Features of the UK economy:
past year manufacturing growth has picked up, services output has remained
steady but the construction sector has slowed.
GDP growth (QoQ)
in size of the economy compared to pre-downturn peak
2-Where is the UK going:
growth held up better than expected in the second half of 2016 but has slowed
in 2017. Forecasters predict that rising inflation, driven by the depreciation
of sterling, will squeeze household incomes and depress consumer spending,
which has been the main driver of economic growth in recent years.
now-casting.com uses statistical modelling to determine what individual
economic data points tell us about the rate of growth . The nowcast chart
(right) shows the model’s evolving prediction of GDP growth in the current
the bond and currency markets are a barometer of investor expectations about a
country’s economic prospects.
bonds through the Debt Management Office is the main way the UK government
borrows money to fund the gap between what it spends and the money it receives.
A rise in
the premium, or yield, demanded by markets for loaning money means funding the
deficit becomes more expensive.
historic low unemployment rate has been one of the major economic success
stories of the past year. Initially led by part-timers and the self-employed,
the growth in employment has broadened to include full time employees. But real
wages, which had started to recover following the financial crisis, began
falling again this year as the depreciation of sterling after the Brexit vote
has fed through to consumer prices but nominal wage growth has not picked up.
weekly earnings growth in three months to November
Exceptionally low inflation, driven largely by falling oil prices,
supermarket price wars and the strength of sterling keeping down the costs of
imports, was a boon for household finances in 2014 and 2015. But the sharp fall
in the value of sterling since the vote to leave the EU means that imports have
become more expensive and inflation has risen well above the Bank of England’s
2 per cent target.
December consumer price inflation: