What are the main types of economic system?
There are three main types of economic system. Each system answers the fundamental economic questions (what to produce, how to produce, for whom to produce) in a different way.
The first of these systems is the traditional economy. In this system, the fundamental economic questions are answered by tradition. The people will produce what they have always produced. They will do it in the same way that they always have. They will distribute the products that they have made in whatever way tradition dictates.
The second system is the command economy. In a command economy, the government answers the fundamental economic questions. The economy produces whatever the government tells it to. The government dictates how the things will be produced. The government decides who will get the products that are made.
Finally, there is the market economy. In this economy, consumers and producers answer the fundamental economic questions through supply and demand. If there is demand for a given product and if suppliers can make a profit through producing it, it will get made. It will get made in the most efficient and profitable way. It will go to whoever wants it and can afford it.
These are the three major types of economic system.