An economy is defined as the way a nation makes choices about using its scarce resources to produce and distribute goods and services. There are three basic economic choices: what to produce, how to produce it, and who receives it. These choices create three types of economic systems - capitalist, socialist, and mixed. A capitalist system relies on private ownership and free markets, while a socialist system involves public or state ownership and central planning. A mixed economy combines elements of both systems, with a role for both private enterprise and government intervention.

2. What is an economy?
An economy or economic system, is
the way a nation makes economic
choices about how the nation will use
its resources to produce and distribute
goods and services in a society.

3. Choices
 Everyday ,in our country and countries
around the world, business owners,
consumers, workers, and governments
must make choices about using scarce
resources.
 Together these choices create an economy.
 These choices fall into three groups:

4. Basic economic choices:
What goods and services should be
produced?
 How should the goods and services be
produced?
 Who receives and consumes these goods
and services.

5. Three types of economic systems:
 These questions are answered by the type of
economic system a nation has. There are
three types of economies:
1. Capitalist economy
2. Socialist economy
3. Mixed economy

6. Capitalist economy(free market
economy)
 Capitalist economy is one in which factors of
production are privately owned and managed and in
which production takes place on the initiative for
earning profits.
 It is a free economy in which government interference
is not found.
 In this the consumers decide what should be
produced, business determine how the products will
be produced.
 Ex. The united states, Japan, Western Europe

7. Features of free market economy
A. Economic freedom: individuals have the right to
choose.
B. Competition: more than one producer of
good/services insures choices.
C. Private property: individuals have the right to own
their own property, including business.
D. Profit motive: individuals are driven by a desire to
profit(make money)
E. Freedom to enterprise: everybody is free to engage
in whatever economic activity he pleases.

8. Socialist economy (controlled economy)
 All material means of production i.e. land, capital
and mines etc. are owned by the whole community
represented by the state.
 The state decides the size and direction of the
investment.
 The state works for the welfare of the society and
profit motive is not important for it.
 Ex. Communist countries (China, North korea,
Cuba)

9. Features of socialist economy:
 Collective ownership of means of production: In
this economy, all the production are state owned.
 Centrally planned economy: All basic decisions
pertaining to what, how and for whom are decided by
the centrally planned authority.
 Economic equalities: a socialist state strives to
achieve economic equality.
 Lack of competition: it avoid all sorts of competition
and rivalry as between different production units.

10. Mixed economy
 An economic system, which contains of both
private and public sectors, is called mixed
economy.
 It permits coexistence of controlled and market
economy.
 The concept of mixed economy was given by
J.M.Keynes.
 Ex. India

11. Features of mixed economy:
 Coexistence of both private and public sector: all
economic decisions are partly taken by state and partly
taken by the private entrepreneurs.
 Planned economy: the government has a clear and
definite economic plan.
 Balanced regional development: public sector
enterprises may be located in the backward regions so
as to ensure its development.
 Dual system of pricing: in private sector price is
decided by the help of price mechanism on the other
hand on govt. sector prices are fixed by the govt.

12. Thank you