This document provides an overview of the key aspects of two main economic systems: the market system and the command system. It describes the market system as based on private ownership, with economic activity coordinated through markets and prices. Individuals act in self-interest and make their own economic decisions. The command system involves government ownership and central economic planning by the government. In reality, most countries incorporate aspects of both systems.

1.  A particular set of institutional arrangements
and a coordinating mechanism to respond to
the economizing problem.
 The economic systems has to determine what
goods are produced, how they are produced,
who gets them, how to accommodate change
and how to promote technological progress.
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2.  The economic systems differ in two aspects:
 Who owns the factors of production
 The method used to motivate, coordinate and
direct economic activity (Decision making
authority).
There are two main economic systems
 1) The Market System
 2) The Command System
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3. It is also called as capitalism.
 Private ownership of resources and
 the use of markets and prices to coordinate
the economic activity.
Private owners (participants) act in their own
self-interest. Individuals seek to achieve their
economic goals through their own decisions
regarding work, consumption or production.
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4. In pure capitalism (laissez-faire),
government’s role is limited as it is
considered that interference by government
will reduce efficiency in achieving goals.
But this couldn’t prevail in the society as
cartels (unions) and monopolies began to
form.
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5.  Due to this, in US and most of other
countries, government plays a substantial
role in the economy.
 It provides the rules for economic activity.
 It promotes economic stability and growth
 Provides certain goods and services that
would otherwise be under-produced or not
produced at all.

6. Private Property
Private individuals own most of the property
resources. It is this extensive private ownership
of capital that gives capitalism its name.
Property rights encourage people to cooperate
by helping to ensure that only mutually
agreeable transactions take place.
Property rights encourage investment,
innovation, exchange, maintenance of property
and economic growth.

7. Freedom of Enterprise
Entrepreneurs are free to obtain and use
economic resources to produce their choice of
goods and services to sell them in the market.
Freedom of Choice
Freedom to choose enable the owners to
employ or dispose of their property and money
as they see fit. It also enables workers to enter
any line of work for which they are qualified. It
ensures that consumers are free to buy the
goods and services that best satisfy their
wants.

8. Self Interest
Self interest is the motivating force of the
various economic units as they express their
choices. It means that each economic unit tries
to achieve its own particular goal, which require
delivering something of value to others.
Entrepreneur try to maximize their profits or
minimize loss.

9. Competition
The market system depends upon
competition among economic units.

10. Technology and Capital Goods
In the market system, competition, freedom
of choice, self-interest and personal reward
provide the opportunity for technological
advancement.
Advanced technology and capital goods are
important for efficient utilization of resources
for achievement of goals.

11. Specialization
Specialization means using the resources of
an individual, firm, region or nation to
produce one or few goods/services instead of
complete range of goods.
 Division of Labor
 Specialization saves time
 Specialization fosters learning by doing

12. Also known as socialism or communism.
 Government owns most of the property
 Decision making occurs through a central
economic plan (made by the government)
Examples: North Korea and Cuba.
In reality, this is very difficult.
 Soviet Union, China, Russia and most of the
Eastern European countries allowed some
private ownership.
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