This PPT describes about the meaning of economic system and the three main types of eonomic systems i.e. Capitalism, Socialism and Mixed economy in detail.

1. ECONOMIC
SYSTEMS & ITS
TYPES
By- Ms Bushra Begum

2. What is an Economic System??
Countries must decide how to distribute its
resources to meet the needs of its people.
They do this through an economic system.
It’s a way the society organizes- production,
distribution & consumptions of goods &
services.

3. 3 questions to be answered by every
society?
1. What to produce? ( which goods & services to be
produced in a society)
2. How to produce? ( the methods of production)
3. For whom to produce? ( the target set of people)
* The way a society answers these questions,
determines its economic system.

4. TYPES OF ECONOMIC SYSTEM :-
1.CAPITALISM OR CAPITALIST
ECONOMY
2.SOCIALISM OR SOCIALIST ECONOMY
3.MIXED ECONOMY

5. CAPITALISM :-
A system where,
means of production (land, farm , factory, other resources)
& distribution are in private hands. {It started in England.}
Eg:- Hong Kong, New Zealand, Switzerland, Ireland etc.
Free market system is found ( anybody can enter)
Profit motive
Cut throat competition
No interference of government.

6. FEATURES OF CAPITALISM –
1. Private property ( individuals free to consume his property &
can transfer to his successors after his death)
2. Free enterprise ( pvt firms can obtain resources, organize &
sell as per their will)
3. Price Mechanism ( determined by demand & supply forces)
4. Consumer’s sovereignty-(complete freedom of choice of
consumption. Customer is the king.)
5. Profit Motive
6. Cut throat competition
7. Limited role of government

7. MERITS :-
1. Automatic working ( since it is profit motive)
2. Capital formulation
3. Maximum satisfaction ( because of varieties
available)
4. Reward according to capacity ( people are
rewarded as per their capacity to work & labor)
5. Efficiency(because of cut throat competition,
efficiency increases. Best person win.)

8. DEMERITS :-
1. Economic Inequality ( Rich becoming richer, poor
becoming poorer)
2. Ignore national interest
3. Lack of coordination ( no government role so decisions
of businessmen often are wrong leading to irregularities
like trade cycles, excess production)
4. Unemployment ( since there is lack of central planning)

9. SOCIALISM :-
It is a system in which population collectively owns
and controls the means of production.
It is a plan for the welfare of the whole society.
The means of production, how much will be
produced & how it will be distributed is decided by
the government.
Started in 19th century.
An economist gave the term “Utopic”-an ideal
society. Socialism tries to make an ‘ideal society’.
Eg:- Finland, Iceland, Norway etc. (College education
is free there.)

10. Characteristics of Socialism :-
1. Government Ownership
2. Central Planning
3. Social Welfare
4. Lack of competition ( because of government
control)
5. No consumer sovereignty
6. Fixation of wages & prices by government

11. MERITS :-
1. Economic equality ( Wealth is distributed among all
people. No government control over production.)
2. Production Planning (objectives is to serve the
entire society.)
3. Economic Stability ( Government establishes
coordination between the demand for production
& supply of goods. Chances of over production &
under production is less.)
4. Proper use of national resources.

12. DEMERITS :-
1. Difficulties of Management ( since everything
is in government’s hands, so government
officials are over burdened)
2. Lack of freedom ( workers are not free to
choose occupation as per their choice)
3. Lack of consumer’s sovereignty ( very less
varieties/options available to consumers)

13. MIXED ECONOMY :-
1. Mixture of capitalism & socialism.
2. It depends on both market (capitalist) & government ( socialist) for the
allocation of resources.
3. It appreciates the advantages of private enterprises but government removes
the free play effect of private enterprises as they may not benefit the entire
community.
4. Government itself run important industries ( railways etc.)
Eg:- India
IRCTC ( Indian Railways Catering & Tourism Corporation)- not fully owned
by government ( privatisation is beginning)
Metro (private plus government)

14. Characteristics :-
1. Division of Public & Private sector
(Important industries given in state hands &
other like consumer goods industries,
agriculture etc given in private hands).
2. Government Control ( by framing rules,
laws)
3. Protection of labor ( Government saves labor
from exploitation by making rules like
minimum wages, working hours etc.)
4. Reduction of economic inequalities

15. MERITS :-
1. Economic Freedom ( consumers free to choose profession,
business etc.)
2. Control on Monopolistic activities ( because of government
rules )
3. Planning & Proper use of resources. ( attention given to
planning)
DEMERITS :-
1. Danger to democracy ( might be possibe that socialism
concept come in & that will be danger to democracy.)
2. Imbalance in the economy ( lack of proper steps by
government)

16. Thank-You