In general, the economy is a system that allocates resources and distributes goods. The activities of the economy determine the value of commodities in a society. These include consumption, commerce, and production.
There are three main types of economies, each based on different characteristics. They are the free market, the command economy, and the mixed economy.
A free market is characterized by the absence of restrictions on the buying and selling of goods. It also allows private entrepreneurs to make major decisions.
A command economy, on the other hand, is characterized by government control over all aspects of the economy. This is usually the case in communist states.
Another type of economy is the free-enterprise economy. Free-enterprise economies are not regulated by the state. Generally, the capital and land is privately owned. With the advent of technology, a large boom in privatization has occurred.
Despite these differences, both types of economic systems have several similarities. In a free-enterprise economy, every citizen has the right to own property in any form.
An example of a free-enterprise economy is the United States. This economy enables economic democracy.
Another example of a command economy is the former Soviet Union. The socialist economic system also promotes communal ownership. Although it does not have a concept of privatization, it does pay uniform wages to workers.
A mixed economy, on the other hand, is a combination of a command economy and a free market. Mixed economies allow government interference in economic practice. However, they still leave most decisions to the free market.
