Economic Systems in Operation throughout the World (Essay Sample)

Running Head: Economic Systems in Operation throughout the World
Economic Systems in Operation throughout the World
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Economic Systems in Operation throughout the World
Introduction
An economic system refers to the rules and regulations that govern the economic structure of a particular society. It encompasses the policies that guide the allocation of scarce economic resources in a certain economy. Economic systems in the contemporary world include free-market economy, centrally planned economy, and mixed economic system (Klein & stern 2007 p.309)
In a free-market system, resources are owned by the private sector. Buyers and sellers decide what to produce and the quantities to be produced. There is freedom of choice and action, and minimal government interference if any (Zupan 2011 p.151). This is the capitalistic type of economic system where there is private ownership of factor inputs with the government fully supporting entrepreneurship.
Centrally planned economic system involved government control of the factor inputs. The government regulates resource allocations and controls who extracts and uses certain factors of production. This is the communist type of economic system where the government owns major economic resources with minimal entrepreneurial opportunities (Woo 1994 p.276)