Define the economic system and its types?

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Detailed Solution

An economic system is the way a country or society organizes the production, distribution, and consumption of goods and services.

Main Types of Economic Systems:

Type	Features	Examples
Traditional Economy	Based on customs, traditions, and barter system. No use of modern technology.	Tribal societies, rural villages
Command Economy	Government makes all economic decisions. No private ownership.	North Korea, former USSR
Market Economy	Decisions made by demand and supply forces. Individuals own resources and businesses.	USA, Japan
Mixed Economy	Combination of government control and private ownership.	India, UK

Every economic system answers three basic questions:

What goods and services should be produced?
How should they be produced?
Who should get them?

For example, in India (mixed economy), both private companies and the government play roles. In North Korea (command economy), the government decides everything. In tribal villages (traditional economy), customs decide. And in America (market economy), supply and demand control production.

Thus, an economic system is the backbone of a country’s growth and determines how wealth is shared in society.

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