Chapter 1 - Economic Systems

Economic Systems

A. Free market economy / Laissez faire

• Definition

- An economy system was operation without government intervention

• Features

- Decision are taken by individual based on supply and demand
- Free market to sell what they choice
- Price based on supply and demand

• Disadvantages

- Existance of unemployment problem
-Existance of wide gap between rich and poor

B.Command economy/Socialist economy

• Definition

- An economy fully controlled by government

• Features

-Decision are taken by goverment
- Goverment plan the allocation of resources

• Advantages 

-Unemployment could be largely avoided
-Same income distribution
-Produces the good and services at efficiency level

• Disadvantages

- Mistake decide in economy
-Technology and innovation are undeveloped

C.Mixed economy

• Definition

- Economy system that mixtures of private and government ownership or control .

• Features

-Individual and firm free to have properties
-Basic economy problem resolved together

• Advantages

- The goverment will try to reduce gap of income
-Control the existence of monopolies