Economic systems
An economic system is an orderly institutional arrangement evolved & adopted by human societies.
It is a mechanism which a society/nation adopts to solve the economic problem.
It is an institutional arrangement through which important decisions such as allocation of scarce resources, wealth etc are taken.
It is dynamic and flexible and undergoes changes and modification from time to time.
The purpose however, of any economic system is the same i.e. to solve the economic problem.
Therefore,
1. An economic system is a mechanism to carry out the economic activities like production, consumption, exchange and distribution of goods and services for the satisfaction of the wants of the community.
2. An economic system helps the nation to take rational economic decisions and there implementation for maximising welfare.
3. An economic system is differs from country to country on the basis of philosophy, institutional & technical organisation chosen in the country.
4. An economic system is influenced by political, cultural & economic factors.
5.An economic system in modern times include – free enterprise run by market mechanism, centrally planned and controlled economy and a mixed economy.
Like all other social sciences, economics deals with a particular aspect of human behavior, analyses the problem and offers solutions to solve the problems faced not only by individuals but also by nations. Therefore economics is known as the “queen of social sciences”.