The Three Types of Economic Systems

Market Economies

In market economies (or capitalist economies), resources are allocated by supply and demand. This leads to lower costs, more choices, and better quality for consumers. The government’s role is limited to enforcing laws and providing essential services like defense. However, market imperfections can lead to inequalities, and firms may focus on profits over public interest.

Planned Economies

In planned economies (or command economies), the government controls resources and production, aiming for equal distribution of wealth and income. Production is need-based rather than profit-driven, which can lower efficiency and the standard of living due to limited choice and motivation.

Mixed Economies

Most economies are mixed, combining elements of market and planned systems. Here, some resources are government-controlled, while others respond to market demand. The government provides public goods and ensures fair competition, while private goods and services are managed by the market.

A tuition fee is the amount of money charged by educational institutions, such as universities or colleges, for students to attend classes and pursue their studies.

A merit-based scholarship is a type of financial award given to students based on their academic, artistic, athletic, or other achievements rather than financial need. and they may cover part or all of the tuition fees, as well as other educational expenses. 

A scholarship is a financial award given to students to help cover the costs of their education.  They are awarded based on various criteria, such as academic achievement, financial need, athletic or artistic talent, leadership, or community service.

Government grants are funds provided by the government to individuals, organizations, businesses, or institutions for a specific purpose, often without the need for repayment.

Financial aid is funding provided to students to help cover the cost of their education. 

A student loan is a type of financial aid that students can borrow to help pay for their education expenses. Unlike grants loans have to be repaid along with interest.

The acceptance rate is the percentage of applicants a college or university admits.

GPA, or Grade Point Average, is a standard way of measuring academic performance

Educational Credit: In education, a credit is a unit of measurement that represents the completion of a specific course or study. 

Curriculum -outlines what students will learn, including the topics, goals, and methods used in teaching.

A full professor is a senior academic rank at a university or college. It is typically the highest rank a professor can achieve.

Abundance means a large quantity or plenty of something.

Commercial services refer to services provided by businesses to other businesses or consumers for profit. E.g. banking, insurance, marketing

Direct services- healthcare, haircut

Employment structure refers to the way jobs are organized within a society, industry, or organization.

Basic economic problems refer to the fundamental issues that all economies face due to limited resources and unlimited wants. 

The market mechanism refers to the process by which the supply and demand for goods and services determine their prices and quantities in a free market.

Income distribution refers to how the total income of a society is shared among its members

Standardized goods are products that are the same in quality and features, no matter who makes them. Examples include items like sugar, rice, or oil.

The judiciary is the branch of government responsible for interpreting and applying the law. It consists of courts and judges who resolve legal disputes, ensure justice, and uphold the law in a society.

Passing laws refers to the process by which a government creates and enacts new laws.

Low-cost housing refers to affordable housing options designed to be accessible to people with lower incomes

A tax is a financial charge or levy imposed by a government on individuals, businesses, or goods and services to fund public services and government activities. 

To be liable to pay tax means having a legal obligation to pay taxes to the government. This liability is based on factors such as income, property ownership, or the purchase of goods and services

Raising revenue through taxation means generating income for the government by collecting taxes from individuals, businesses, or goods and services.

Customs duties are taxes or fees imposed by a government on imported or exported goods. These duties are typically collected when goods cross international borders and are used to generate revenue for the government or protect local industries from foreign competition. The amount of customs duty depends on the value, type, or origin of the goods.

Value-Added Tax (VAT) is a tax added to goods and services at each stage of production or sale. Businesses collect VAT from customers and pass it to the government. Consumers pay the tax when they buy the final product.

Privatization is the process of transferring ownership and control of a business or service from the government to private individuals or companies

Efficiency refers to the ability to do something in the best possible way with the least amount of time, effort, or resources

To raise capital means to gather money or funds needed for a business or project. 

Capital markets are places where companies and governments can raise money by selling stocks and bonds

Foreign capital refers to money or investments coming from foreign countries to fund businesses, projects, or industries in another country

issuing vouchers means giving out coupons that can be exchanged for goods, services, or financial help

An enterprise is a broader term that refers to any organization or venture engaged in economic activity, whether it’s a small business, a large corporation, or a project

Diversify in business, it means a company expanding into new products or markets to reduce risk and grow.

The pendulum of control- In a business or political context, it often describes how control swings back and forth between centralized authority (top-down control) and decentralized autonomy (more freedom or decision-making at lower levels)

Comprehensive means including all or nearly all elements or aspects of something.

Laissez-faire is an economic idea that supports minimal government interference in business, allowing the market to operate freely.

Government interference refers to the actions taken by the government to regulate or influence economic activities

Government-run companies are businesses owned and operated by the government. They are created to provide goods or services that may not be adequately supplied by private companies or to manage strategic industries

E.g. airlines, utilities, public transport 

A central planning system is an economic system where the government or central authority makes all decisions about the production, distribution, and pricing of goods and services.

Contractors are individuals or companies hired to perform specific tasks or provide services based on a contract.

Level playing field  In economics, it means creating a competitive environment where businesses or individuals can compete fairly, without one side having an advantage

Proponents are people who support an idea

Trade unions are organizations formed by workers to protect their rights and improve conditions at work

Excise taxes are taxes imposed on specific goods or services, such as alcohol, tobacco, gasoline, and luxury items. These taxes are typically included in the price of the product and are paid by the manufacturer or seller, though the cost is often passed on to the consumer. The goal is to raise revenue and sometimes to discourage the use of certain products for health, environmental, or social reasons.

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