Different Types of Economic Systems Explained An economic system is a framework that determines how a society produces, distributes, and consumes goods and services. There are four main types: traditional, command, market, and mixed.   1. Traditional Economy Definition: A system where economic decisions are based on customs, traditions, and beliefs.   Characteristics: Limited economic growth.   Focus on subsistence farming and hunting.   Little technological advancement.   Strong community ties.   Examples: Some indigenous communities in remote areas.   2. Command Economy Definition: A system where the government controls all economic activity.   Characteristics: Centralized planning.   Government ownership of resources.   Limited consumer choice. Potential for inefficiency and shortages.   Examples: Former Soviet Union, North Korea.   3. Market Economy Definition: A system where economic decisions are made by individuals and businesses based on supply and demand.   Characteristics: Private ownership of resources.   Competition among businesses.   Consumer sovereignty.   Potential for economic inequality.   Examples: United States, United Kingdom, Japan.   4. Mixed Economy Definition: A combination of command and market economies.   Characteristics: Government intervention in certain sectors.   Private ownership of many businesses. Social safety nets.   Balanced approach that seeks to address market failures.