1.1.6

• Economic systems

  An economic system is a network of organisations used to revolve what, how, much and for whom to produce i.e. a way of solving the basic economic problem (when there are infinite demands on finite resources)
• A free market economy

  Markets allocate resources through the price mechanism.

  In a free market system, there is a limited role for the government, indeed in a pure free market system, the government limits itself to protecting property rights of people and businesses using the legal system and protecting the value of money or the value of a currency.
• A command economy

  In a command economy system associated with socialist or communist system, the government owns scarce resources. The state allocates resources and sets production targets and growth rates according to its own view of people's wants.
• A mixed economy

  In a mixed system, some resources are owned by the public sector (government) and some are owned by the private sector. The public (or state) sector typically supplies public, quasi-public and merit goods and intervenes in markets to correct market failure.