There are Four Economic Systems

(1) The Traditional Economy

This type of economy is based on customs and traditions and focuses on the basic economic questions which we examined in our Note on the Economic Agents (Click here for Note on Economic Agents). These questions are; What to Produce, How to produce and for whom to produce. In the Traditional Economy these questions are answered by their norms and traditions.

This type of economy is most seen in indigenous tribes such as the Tribes of the Arctic.

(2) The Planned/Command/Communist/Totalitarian Economy

This type of economy exists where the majority of the decision making and distribtion of resoutces are determined solely by the government with little input from the consumers. Price and good quantities are all decided by the government. In a Planned Economy the Government's primary focus is the efficient and optimal distribution of resources in the economy.

(3) The Free Market Economy

The Free Market Economy is on the opposite spectrum as compared to the Planned Economy, in the sense that, instead of the government taking full control of decision making; the Economic Agents decide the allocation of resources. The Economic Agents usually prioritise personal gain and self interests rather than optimal allocation of resources. This type of economy has limited to no input from state in the allocation of resources and is usually entirely dependent of supply and demand.

(4) The Mixed Economy

This type of economy is a combination between the Planned Economy and the Free Market Economy. Both state and the economic agents have a say in the price and quanitity of goods in the economy. This is the most common type of economy in the Caribbean - like Trinidad and Tobago.

Advantages and Disadvantages