BASIC ECONOMIC SYSTEMS

There are four main types of economic systems namely:

1. Free Enterprise or Capitalist Economy
2. Centrally planned or Socialist Economy
3. Communal Economy
4. Mixed Economy

Free Enterprise or Capitalist Economy

Here, government allows private persons/individuals to own the means of production. Examples of countries practicing capitalism are: U.S.A., Nigeria, and U.K.

Features of Capitalism 

1. Private ownership of means of production.
2. It is profit oriented.
3. There is class struggle among the capitalist.
4. Free enterprises exist.
5. Perfect competition is held at the esteem.

Centrally planned or Socialist Economy:

Here, the means of production are predominantly owned and controlled by the state. Government does not allow for complete private ownership because the means of production is likely not to bring about efficiency in the use of scarce economic resources.

Features of Socialism

1. State ownership of means of production
2. Major economic activities are centrally planned.
3. Lack of profit motive.
4. Absence of exploitation
5. Income is equitably distributed.

Communal Economy

is an economic system in which the means of production are communally owned.

Features of Communism

1. Means of production are owned communally.
2. There is absence of class struggle.
3. It is made up of classless society i.e. every person is equal
4. Goods are equitably distributed.
5. Full social equity is attained.

Mixed Economy:

Here, the means of production are owned and controlled by both government (state) and private persons or individuals. It is a mixture of both socialist and capitalist economy.

Features of Mixed Economy

1. The means of production are owned and controlled by both government and private persons.
2. Economic decisions are shared between the state and Individuals.
3. It is also profit oriented.
4. Combination of centralization and decentralization.
5. Forces of demand and supply exist.