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4. Types of Economy
Each economy has a set of institutional arrangements to tackle the three basic economic problems. On the basis of these arrangements, economies are classified into :
  1. Traditional economiesMean
People tackle the three basic economic problems by following the traditions and customs passed from theirancestors.
  e.g. some primitive tribes.
  Primitive Traditional Economies
  2. Market economiesMean
The market forces of demand and supply perform the task of resources allocation to meet the needs of the community.
  e.g. U.S.A. , Hong Kong.
Market Economies
Hong Kong
  3. Planned economiesMean
There is a central authority to decide what, how and for whom the goods and services are produced.
e.g. in China, there is a State Planning Commission to regulate the economy.
  China Planned Economies
  B. Market Economy vs Planned Economy
Market Economy
Planned Economy

widespread private property right:

most of the productive resources are owned by individual people, who have the exculusive right to use them and to get the income gained.
state ownership of productive resources:
most resources are owned by the government. e.g. the Constitution of the People's Republic of China states that "All mineral resources and waters as well as the forests, undeveloped land and other resources owned by the state are the property of the whole people".
price of goods is set by market forces and price is used to allocate resources.
non-price comprtition:
price of goods is set by the government which uses other means to allocate reources.
decentralized decision making:
except for the public sector, economic decisions are made independently by individual producers and consumers.
centralized decision making:
individual production units have to follow the decisions and instructions from the central government.
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