2.5: Different economic systems

market economy

• individuals are allowed to make their own economic decisions

• governments play minor role

  • provide legal framework

• aka free market economy

planned economic systems

• governments play a dominant role

• decide which goods are produced and services offered

• decide prices of goods and services

• control resources and means of production

• people have limited choice of which job and products to buy

social market economy

• government plays a more important role by influencing economy to higher extent

• supports poor, protects environment

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