Exploring the Four Types of Economic Systems with Examples

This essay provides a comprehensive overview of the four main types of economic systems: traditional, command, market, and mixed economies. It defines each system, highlighting their key characteristics, advantages, and disadvantages. The essay discusses how traditional economies rely on customs and traditions, command economies are centrally controlled by the government, market economies are driven by supply and demand with minimal government intervention, and mixed economies combine elements of both market and command systems. Furthermore, it compares the economic systems of Malaysia (mixed economy) and China (command economy), examining the role of government intervention, price mechanisms, and economic planning in each country. The essay concludes by emphasizing the importance of understanding a country's economic system to analyze its economic growth and development.

Running head: TYPES OF ECONOMIC SYSTEMS
Type of economic systems
Name of the student
Name of the university
Author note

TYPES OF ECONOMIC SYSTEMS
Different types of economy
The system which comprises of the mechanism for production, distribution along with
exchange for products apart from the consumption of the goods and services in the various
entities are termed as an economic system. There are mainly four types of economic systems.
An economic system can also be termed as an organized way through which a country can
allocate its resource and also distributes goods and services throughout the whole nation.
Economic systems can also be termed as the means through which the governments of the
county will be allocating resources and trade goods and services (Becker, 2017). The
government controls the five factors of production which includes capital, labor, physical
sources, entrepreneurs and the information resource. Therefore, an economic system can be
termed as a system of production, allocation of resource along with the distribution of good
within a society or within a given area. All the economic systems generally comprise of three
basic questions which includes
 What goods are to be produced and in what quantities?
 How will the goods and the services will be produced and by whom along with what
resources and technologies should be used?
 Who receives the output of the production? Who will be enjoying the benefits of the
goods and services and then how will the products be distributed to the society?
The study of the economic systems therefore states the relationship present between
the agencies and the institutions.
There are basically four different types of economies. They are traditional economy,
command economy, mixed economy and market economy.

TYPES OF ECONOMIC SYSTEMS
Traditional economies:
The traditional economic system is known to be one of the most important ancient
types of economies which is resent in the world. It has been found that huge portion of the
world still functions under the traditional economic systems. The traditional economic
systems is mainly known to be present in rural, closely tied up land and in second or third
world countries. Presence of surplus is quite a rare phenomena in this type of economic
system. One of the advantage of this type of economy is that the tradition and the custom are
preserved which is not present in the mixed economies (Ghisellini, Cialani & Ulgiati, 2016).
The members in this economy also have a more specific and pronounced role and also these
economies are socially satisfied. However one of the disadvantage is that the economies
cannot enjoy western medicine, technology and centralized utilizes. The traditional economic
system is generally most traditional and ancient type of economy. Traditional economies
cannot achieve the type of surplus or profit which results from the market or mixed economy.
It generally focuses on the goods and services which are directly related to the beliefs,
traditions and customs. The traditional economic system generally focuses on the customs
and history. The traditional economy usually exists in a nomadic society. The traditional
economy usually covers vast areas in order to find enough food for supporting them. Most of
the traditional economies also only produce what they need. Therefore, there is hardly any
surplus or leftovers. When these type of economies trade they usually relies on the barter. It is
present only between groups which do not compete.
Command economic system
In case of the command economic system, thee major part of the economic system
will be controlled by the government or the centralized power. As the government is one of
the main feature of the economy, it will be present in everything which comprises of planning

TYPES OF ECONOMIC SYSTEMS
and redistributing of the resources. A command economy is also capable of creating healthy
supply of resources which will reward people by affordable prices. In case of a command
economy the government wants all the important industries like the aviation, railroad and
utilities. There are several advantages of the command economic system like if this kind of
economic system is executed correctly, it can help the government to mobilize its resources
in a large scale. This type of mobility will help in providing jobs for most of the citizens
(Wang, 2017). The government will also be able to focus on the goodness of the society
which suggests efficient usage of the resources. . In case of command economy the
government can also create a lot of jobs and services at an affordable rate. One of the most
significant feature of the command economy is that most of the part of the economic system
is usually controlled by the centralized power. Although, the government in the command
economic system tries to control its most valuable resources. Some of the advantages which
is present in this type of economy is the government will be able to produce healthy supply of
the resources and will be rewarding the citizens with the affordable prices.
Market economic system
The market economic system is very similar to the free market. The government in
the market economic system will not be controlling any vital resource or any kind of special
good in the economic system. In this kind of economic system, most the things are run by the
people. One of the advantage of the market economic system is that the market and
government are separated (Wang, 2017). There is absence of any kind of government
intervention in a pure market economy. Due to separation of both market and the
government, it will be preventing the government to become more powerful. It also prevents
the government to be aligned with the markets. Some of the advantages of the free market
economy is that the consumers can pay the highest price which they want do and the
businesses can only produce profitable goods and services. The free market economy can

TYPES OF ECONOMIC SYSTEMS
also led to an efficient usage of the factors of production since the business are quite
competitive in nature. Business in this kind of economic system generally invests heavily in
the research and development. Some of the disadvantages of the free market economy is that
as a result of the competitive nature of the free market, businesses will not be caring for the
elderly and the disabled which leads to high income inequality. The free markets are
completely driven by the self-interest (Becker, 2017). The economy therefore needs to take
care of the human needs such as providing proper healthcare for the poor people. The
consumers may sometimes get exploited with the presence of monopolies.
Mixed economic system
The mixed economy is a combination of various types of economic system. Mixed economic
system is a cross presence between a market economy and the command economy. In case of
the mixed economic systems, the market is free of government ownership except for defense
and railroad. Although, the government involves regulation of the private business. Some of
the advantage of the mixed economies are presence of less government intervention
compared of the command economy (Ghisellini, Cialani & Ulgiati, 2016). As a result of this
the private business can run efficiently and can easily cut cost. In case of market failure the
government can intervene by creating net programs. In case of a mixed economy government
can also use the policies of tax for redistributing income and reducing the inequality. This
kind of economy is also known as the dual economy. Although there exists a number of
disadvantages in case of mixed economies. One of the disadvantage of the mixed economies
is that the state run industries are subsidized by the government and then run to large debts as
they are uncompetitive in nature.
In the study the economic systems of Malaysia and China have been compared. It is
known that Malaysia has the mixed economic system and o the other hand China have a

TYPES OF ECONOMIC SYSTEMS
command economic system. Malaysia is a member of the Asia Pacific Economic system,
Trans Pacific Partnership and Association of Southeast Asia Nations (Schneider, &
Schmidtke, 2017). It has a mixed economic system which includes different kinds of private
freedom, government regulation along with centralized economic planning. Therefore it can
be stated that there is a presence of both mixed economic system and the command economic
system. The price mechanism here is allowed to work however in most of the cases the
mechanism can fail or does not work for the public. Some of the economies are private and in
some part they are controlled by the government. On the other hand China is a command
economy where the government can control the economy. The command economies are quite
an inferior to the free market economies. This inefficiency have created shortages and
wasteful surpluses. The mixed economies are controlled by the government. Surplus and
shortage and surplus take place in the market, when the surplus takes place the producers
have to reduce o decrease the price so that more demand is created in the economy. The
Malaysian government therefore will be responsible by helping them tomake the supply meet
the demand of the market . Malaysia which is known to have the mixed economy combines
the advantages of both Free Enterprise System and the Central Command System. The price
mechanism can operate freely, however in some of the cases the price mechanism may fail to
operate where the government have to work. In case of Malaysia the degree of the
intervention by the government and the public are most of the time at balance. The outside
traders in Malaysia are not allowed to join as a result of the monopoly power (O'neil, 2015).
The intervention by the government also takes place by controlling the prices of the goods
and services. On the other hand in case of China where there is the command economy, the
government controls the economy. In case of China the government controls the economy
acting as a central planner. The government therefore should be intervening the economy in
the right way which correct the defects by using suitable solutions y overcoming the

TYPES OF ECONOMIC SYSTEMS
economic problem and managing the finance. The government in both the countries needs to
consider by clear decision making. The command economic system of China takes place
when the government controls all the major aspects of the economy and the economic
production. The government in most of the cases decides what to produce, how to produce
and to distribute goods and services within the economy. However in case of the free
economic system, there is absence of any economic intervention along with the regulation by
the state. In case of the free market economy the government plays a neutral role in the
economy. The characteristics in the free economic system the markets are free to earn profits,
free to be an investor, they are also free to compete and create capital formation. However in
case of China, where there is command economic system the government will be controlling
the major aspects of the economy and the economic production (Ghisellini, Cialani, &
Ulgiati, 2016). Malaysia is known to be one of those countries in the world who maintains
the largest production capacity in the ASEAN region. In case of Malaysia the resources are
usually controlled by the government and individuals. Businesses which wants to establish
their operation in Malaysia can usually control all their business operation but will be in line
with the government requirement. When the economic system of the country is understood ,
it will then help in revealing the forces which will be behind the growth of the country. The
Malaysian economy is known to be the third largest economy in the South Asia. The labour
productivity of Malaysia is known to be much higher compared to those of Thailand,
Indonesia and Philippines. On the other hand China has the command economic system or is
known as the socialist market economy. The government of China is known to control the
economy by acting as the central planner unlike the government of Malaysia.

TYPES OF ECONOMIC SYSTEMS
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