An economic system is a procedure of organization of the economy that society carries out to manage and administer its resources.
In simpler words, an economic system is the set of rules that govern a geographic area’s economy. Depending on the characteristics of the financial system, we can differentiate two main types. Those who give more power to the State and those who give more importance to individuals’ freedom of choice.
Along this line, we can say that the two great types of systems are capitalism and socialism. The first of them propose, mainly, the freedom of the market and private property defence. The second, which we call socialism, offers the opposite. That is the regulation of the market and the security of collective property.
Referring to economic systems, we can differentiate two types, which we have already named at the beginning and a third that we call mixed.
An economic system, as a mode of organization, has a series of elements that compose it. These include:
Goods and services: That is, all those goods and services that satisfy our needs.
Economic agents: The economic agents are companies, families and the State.
And also, Productive factors: They are land, work and capital.
Each of these three factors is organized in different ways and gives rise to economic activity. Depending on its nature, this economic activity can be part of the primary or agricultural sector, the secondary or industrial sector, or the tertiary or services sector.
The following elements make up an economic system:
Economic agents: Families, companies and the State.
Production factors: Land, labour and capital.
Goods and services: Goods and services produced to meet the needs of economic agents.
These elements give rise to different economic activities. These can be part of the agricultural or primary sector, the industrial or secondary industry, or the tertiary or services sector.
An economic system is a structure or way of organizing a society’s economic activity, producing goods, and providing services, managing and administering the available resources.
And also, hand in hand with new technologies, the collaborative economy has emerged.
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