Definition of an Economic System

Wall Street is considered the seat of the American economic system.

An economic system is the type of rules and schemes used by a group of people to exchange valued goods and services between different parties. Having a system that this group agrees upon is necessary for the relative success of trade. Different types of systems exist around the world and are usually heavily linked to the actions of a government.

Function

Economic systems are important for the function of trade around the world. While each country maintains a slightly different economic system, the overall principle of exchanging goods and services according to supply and demand is necessary for modern society.

Types

According to Economy Watch, a financial and investment advice provider, there are three types of economic systems--a market economy, a planned economy and a mixed economy.

Identification

The Council for Economic Education addresses the relationship between different economic systems and the status of a country. Democracies tend to have a market or mixed economy, while dictatorships tend to have a planned economy.

Significance

Most developed countries in the world have one of the defined types of economic systems, while the undeveloped world may go through each type before deciding on a proper system.

Considerations

The modern economic system used around the world stems from the growth of class structure from feudalism. The growth of the merchant class created a market for goods and services, giving rise to divergent theories of economic practice.

References

• Economy Watch
• Council for Economic Education
• ApatheticVoter.com

Resources

• Economics Web Institute