Types of Economic Systems

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What is a Traditional Economy?

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Decisions are based on traditions and practices upheld over the years and passed on from generation to generation. Methods are stagnant and not progressive.

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In what type of societies does a Traditional Economy exist?

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Primitive and backward civilizations.

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What is a Command Economy?

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An authoritative system where decision-making is centralized in the government or a planning committee, imposing decisions on the people.

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In which political systems does a Command Economy typically exist?

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Dictatorships and socialist states.

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What is a Market Economy?

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The most democratic economic system based on demand and supply, where producers and consumers decide what, how, and for whom to produce.

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How are decisions made in a Market Economy?

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Collectively guided by the price system determined by supply and demand.

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What is a Mixed Economy?

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A combination of the three basic types of economic systems, adopting a mixture of traditional, command, and market economies.

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Can an economic system exist in its pure form?

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No, it normally adopts a mixture of the three systems with the dominance of one.