Definition and Meaning of Economic Systems | 4 Types of Economic Systems

Fri, 04/24/2009 - 20:25 -- Umar Farooq

Definition of Economic Systems

According to Loucks definition of economic system is that it consist of those institutions which a given people or nation or group of nations has chosen or accepted as the means through which resources are utilized for the satisfaction of human wants.

According to Gruchy, It is an evolving pattern or complex of human relations which is concerned with the disposal of scarce resources for the purchase of satisfying various private and public needs for goods and services.

What is Economic System

To understand meaning of  economic systems, it refers to the role or model of distribution and production which take place in the society. Business is considered as an organized economic activity. The primary objective of any business is to product and sale goods or services. It exists to serve people living in the society with differ means. There are some questions which a economic system must answer:

  • What to product and service to provide
  • The organized of both the production and services
  • What are the methods to distribute products and services

Everyone knows that resources are limit and must be utilized in a manner to get maximum output. In country people must decide what to produce and also define the quantity. This decision involves many factors like development level of a country, resource available, prevailing culture and economic and social status of individuals in society.

Types of Economic Systems

There are four types of economics systems namely

  • Capitalism or Private Enterprise Economy
  • Socialism
  • Communism
  • Mixed Economy or Government and Private Sector


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