Four Kinds of Economies

Any good Economics tutor Singapore would tell you that economics is nothing but the distribution of scarce resources. The way this distribution is done determines the type of economy, and accordingly there are 4 types of economies we have.

The first category is the traditional economy. This is the oldest type of economy, and we still see this type of economy in the lesser developed nations of the world. The majority of economic activities in this type of economy are agrarian, and mechanization is less common. Most of the gross domestic product of the economy would be internally consumed and there would be very little surplus, if any.

Another category of economy is what is called the command economy. This is most likely to be seen in a country where there is little or no decentralization of power. Resources are likely to be tightly controlled by a central political entity. All the utilities, public transportation, and most of the manufacturing is also controlled centrally. The best example of a command economy quoted in any economics tuition Singapore used to be the erstwhile USSR. In today’s world, China and North Korea are two prime examples of fully functional command economies.

The most common type of economy in today’s world is the laissez faire economy, or a free market economy. Such an economy has no intervention of any kind from the government. Individual and corporate entities who are part of such an economy act completely in their own interest to maximize revenue and profits, and their actions determine the market forces of demand and supply. One of the best examples of a successful free market economy is Hong Kong.

Finally, the last category as suggested by econs tuition is what is referred to as a mixed economy. This is a cross between the earlier two types mentioned – command economy and free market economy. The government’s intervention is limited to a few specific areas, and the rest of the economy is run as per market forces, and not by regulation. The good thing about such an economy is that it tries to bring in the best qualities of both economies, and does away with the undesirable elements.