What is an Economic System?

Because of the fact that there is scarcity of resources and unlimited wants, it is always a problem to allocate resources in an efficient manner. We are constantly facing three basic questions. These are:

• What to produce?
• How to produce?
• For whom do we produce?

Every community or country must choose and develop its own way of solving these problems. The way a country decides what to produce, how to produce and for whom to produce is called it Economic System.
The three Economic Systems existing are:

• Market Economic system
• Planned Economic System
• Mixed Economic System

Note:

• There are no PURE command economies
• There are no PURE market economies
• Instead there is a continuum of different characteristics