Economic system - What is it? elements, types, and more

Economic system

Production structure is used to organize the social, economic, geographic, and demographic relationships that govern an economy.

What is an economic system?

An economic system is a production structure used to organize the social, economic, geographic, and demographic relationships that govern an economy.

This is implemented in order to regulate the economic activities of a certain geographical space, according to the needs of the population and stimulate economic growth.

Elements of an economic system

The elements of an economic system are as follows:

• Goods and services: those goods and services produced to satisfy the needs of the market.
• Economic activities: activities generated by the service, agricultural or industrial sectors.
• Economic sectors: made up of the agricultural, service, and industrial segments.
• Economic agents: actors involved in the system:
  • Families: responsible for the consumption of goods and services within the home.
  • Companies: responsible for the manufacture and distribution of goods and services.
  • State: in charge of regulating and monitoring, through strategies, the consumption of goods and services to avoid abuses in the market, such as monopolies.

Types of economic systems

The following are the main types of economic systems:

• Socialist economic systems: this system is based on collective property, that is, public ownership of the means of production ( raw materials, machines, etc.) equitably redistributing, with social policies, the accumulation of wealth by the privileged minority.
• Capitalist economic system: This type of system is based on private ownership of the means of production (raw material, machines, etc.). It gives importance to capital as a generator of wealth and to the allocation of resources through market mechanisms.
• Traditional economic system: It is based on a traditional basic system, characterized by focusing on customs and beliefs to solve the basic problems of the economy. Generally in this traditional structure, barter is used and income-generating activities are usually traditional jobs, such as agriculture, fishing, etc.
• Authoritarian economic system: this economic system is based on decision-making by means of a determined central or maximum authority, for example, a king, who is in charge of making all the economic decisions of the territory.
• Market economic system: in this economic system decisions are made by the inhabitants, that is, consumers have the free decision to choose a product or not, and therefore the market becomes a constant price competition.
• Mixed economic system: system characterized by the combination of state intervention and market supply and demand.

 

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