Types of Economic Systems

The business all over the world exists in different countries that have separate economies. These economies are run through different policies. these policies determine the form and shape of businesses in those countries. For example, a country may allow private companies to establish bank while another country may decided to allow only government institutions to form the banks. These differences in the different countries exist due to the presence of different economic systems in these countries. There are various economic systemic being used throughout the world. These are discussed below:

a) The Command System: (Socialism)

     In this type of system, the ownership and management of business is in the hands of a central authority, or the government. The allocation and use of resources is determined by political decision making and is under bureaucratic control is usually exercised over the whole range of economic needs in the nation, including military. This system predominates in the communist countries such as Russia and china. In a Pakistan, this system works in the shape of corporations such as National Fertilizer Corporation, Pakistan National Shipping Corporation, Utility Stores Corporation of Pakistan, Pakistan 

Petroleum Limited etc. This system traces its origins to the socialism and communism which emphasized the role of state in the economic activities.

b) Market System: (Capitalism)

     In contrast to the command system, this system ignores the role of central control of planning, government regulation, or public enterprises. The nation's business resources are employed and managed by private enterprises. The individual decisions of business owner and managers influence the prices, wages and costs in a competitive market. Competition in free market serves as an automatic regulator of regulator of supply and demand. Most of the English-speaking countries, European Union, Japan and developing countries in Asia and Africa have this type of system. This system is derived from the capitalism which encourages the role of individuals in deciding the economic activities.

c) Mixed System:

   In 21st century, all business systems are a mixture of command and market systems. They mix private enterprises and social control in varying degrees, with one or the other predominating, various types of mixes business systems. This type of system is basically a mixture of capitalism and communism where private businesses are involved in markets along with some government run corporation. Almost, all developing countries have some form of mixed economic systems.In Pakistan, private businesses are allowed in many sectors of economy where private firms are working as per market conditions to supply the required goods and services to the consumers. However, some government organizations are also working in some economic sectors i.e. defense, air aviation, shipping, mining etc.