Economic Systems

Every economy must answer the three questions:

1. What to produce?
2. How to produce it?
3. For whom to produce?

Economy’s can answer these questions through three basic systems.

Command Economy – Command economies answer these questions through centralized planning, often government intervention and regulation.

Traditional Economy – Traditional economies answer these questions by following past customs accepted by society.

Market Economy – Market economies allow supply and demand to arrive at an equlibirum price which allocates the goods and services.

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