What are the economic system of economic?

Answer 1

There are 3 major and common problems faced by every economical unit.

1)What to produce?

2)How to produce?

3) Produced to whom?

Though these questions are common various economic units use several methods to solve them.These various types are called Economic Systems.

So A social and institutional order which is developed by people to solve major economical problems can be defined as a Economic System.

The word System is specially used in subjects like Bio Science to express bunch of institutions which work under their authority not under external influences.

So in a Economic System there we can find hundreds of institutions which work as above.

Examples-Business Institutions,Households,Government, Law, Incentives etc.

By the way we know that there is a diversity in Economic Systems. There are 3 major reasons for that diversity.

1)Ownership of property and rights (when Factors such as Land,Capital are handled with Private sector it is called a CAPITALIST ECONOMIC SYSTEM.When such factors are handled with Government it is called a SOCIALIST ECONOMIC SYSTEM)

2)The Mechanism used to coordinate the answers given to major economic problems

(when major economic problems are solved under the guidance of Price Mechanism it is called a Market Economy. When it is done under the command of government it is called a COMMAND ECONOMY)

3)The system of Incentives (Incentives motivate various economical units to economical activities. In market economies that motivation is given by Profit. In Command economies it is gained through Powers of Authority)

---Hirantha Imesh(HIRU)