E.1.7.

Standard E.1.8>

=**This page is no longer active. See Economics E. 1.7 **= = = =**Compare and contrast how the various economic systems (traditional, market, command, mixed) try to answer the questions: What to produce? How to produce it? And for whom to produce? **=

//Focus Question: What are the different types of economic systems?//
[|The Four Types of Economic Systems]

**Traditional Economy**
A **traditional economy** is an economic system in which resources are allocated by inheritance, and which has a strong social network and is based on primitive methods and tools. It is strongly connected to subsistence farming. Most countries that have historically had a traditional economy have replaced it with a command economy, [|market economy], or [|mixed economy]. However, it is still found today in underdeveloped, agricultural parts of [|South America], [|Asia], and [|Africa]. 

**Advantages**
Traditional economy fosters a sense of community, as it causes little friction among members and provides a sense of security and psychological comfort. Subsequently, there is a relatively low unemployment rate and low [|crime rate]. A traditional economy allows for a greater degree of autonomy little or no money is used. 

**Disadvantages**
A traditional economy does not allow for much economic growth and development as changes are very slow and little social mobility. A traditional economy does not take advantage of technology and there is relatively little promotion of intellectual and scientific development. A traditional economy provides few incentives for [|entrepreneurs], thus limiting choices for consumers and a lower standard of living. Therefore it is not recommended for larger countries because then it just won't work out-because the larger countries have more people, instead of a smaller country with less people that can be commanded.

**Summary**
A traditional economy is where people produce most of what they need to survive.Hunting and gathering, farming, and herding cattle are the bases of traditional economy. People hunt for the food they eat or raise it themselves. Often they make their own clothing and tools. If they produce more food than they need, they trade the surplus, or extra food, for goods made by others.

**Market Economy**
An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy, in which government decisions drive most aspects of a country's economic activity. Market economies work on the assumption that market forces, such as supply and demand, are the best determinants of what is right for a nation's well being. These economies rarely engage in government interventions such as price fixing, license quotas and industry subsidizations.

While most developed nations today could be classified as having mixed economies, they are often said to have market economies because they allow market forces to drive most of their activities, typically engaging in government intervention only to the extent that it is needed to provide stability. Although the market economy is clearly the system of choice in today's global marketplace, there is significant debate regarding the amount of government intervention considered optimal for efficient economic operations.

An economy where there is more government intervention than in a free [|market economy]; many of the activities of production, distribution, and exchange are undertaken by central government, but where there is more economic freedom for the individual than in a [|command economy]. There is therefore a mixture of [|socialism] and [|capitalism].
 * Mixed Economy**

http://www.answers.com/topic/traditional-economy?cat=biz-fin http://www.answers.com/topic/market-economy?cat=biz-fin http://www.answers.com/topic/mixed-economy?cat=biz-fin