TYPES OF ECONOMIES
I. INTRODUCTION – TYPES OF
ECONOMIES
Types of
Economi
es
On the basis of the On the basis of the
stage of Nature of the
Development Economic System
Develop
ed Capitalis
economi m
es
Developi
ng Socialis
economi m
es
Mixe
d
II. DEVELOPED AND DEVELOPING ECONOMIES
1 . A Developed country is defined as a country which has a high real per capita income.They enjoy a
higher standard of living e.g. USA, Canada, New Zealand etc.
2 . An Underdeveloped or Developing country is defined as a country in which real per capita income is
low and which has the potentiality of development.
III. DIFFERENCES BETWEEN DEVELOPED AND DEVELOPING ECONOMIES
BASIS DEVELOPING ECONOMY DEVELOPED ECONOMY
A developing country is a country in which A developed country is defined as the
real per capita income is low and which country which has a high real per capita
Meaning
has the potentiality ofdevelopment. income.
Poor quality of human capital, lowliteracy Better quality of human capital, high
Human ratio, low level of education, inadequate literacy ratio, higher education level,
Capital health facilities and poor sanitation adequate availability of health and
facilities. sanitation facilities.
The growth rate of population The growth rate of population indeveloped
Population indeveloping economies is very high dueto countries is around 0.6 to 1 percent per
Growth its prevailing high birth rate and falling annum. So, they have less density of
Rate death rate. The population inthese population. People can enjoy more
countries is increasing by 2 to 3 percent resources.
,per annum.
, IV. TYPES OF ECONOMIC SYSTEMS
Different countries follow different economic systems, such as Capitalistic, Socialistic and Mixed
Economies.
“An Economic System is defined as a sum total of all those devices and institutions through which
economic choices are made and scarce resources are used for the purpose of satisfying various human
wants.”
V. CAPITALISM
1. Definition of Capitalism or Capitalistic Economy
i. A Capitalistic Economy is an economy in which productive resources are owned by private
individuals who use these resources to earn profits and in which the state (government)
intervention is minimum so that the economic activities are mostly unplanned and uncoordinated.
ii. As Capitalistic Economy is based on free enterprise with minimum interference by the
government, it is also known as Free-enterprise Economy, Market Economyor Laissez-faire
Economy.
iii. The Capitalistic system is the oldest economic system, it is practised today in a large number of
countries like the USA, UK, France, Canada etc.
2. Features of Capitalism or Capitalistic Economy:
i. Private Property
This is the essence of Capitalism. This right means that private property such as factories,
machines, plants etc. can be owned by private individuals and companies. The things covered
under this right are as follows - Every individual can acquire any amount of property, use and
sell the property and productive resources.
However, this right is not absolute and unrestricted, there are some government restrictions
imposed on it.
ii. Right of Inheritance
The right of inheritance means that the property owned by an individual can be legally passed
on to his legal heirs like sons and daughters.
This provides a powerful incentive to the people to save and accumulate wealth
iii. Freedom of Enterprise and Occupation
Freedom of Enterprise means that the private enterprises are free to use their productive
resources to produce a product of their own choice.
Freedom of Occupation implies that the individuals are free to choose an occupation of their
choice in accordance with their education, talent, ability and efficiency. They can move from
one job to another or from one place to another in search of better opportunities.
iv. Freedom of Choice for Consumers
Consumers are free to buy and consume goods and services of their choice.
It is the choices and preferences of the consumers that determine the nature and quantity of
goods which are produced in the economy and hence the consumer is regarded a Sovereign or
a King in a Capitalistic Economy.
v. Price Mechanism
Price Mechanism is the process through which prices of goods and services are determined by-
I. INTRODUCTION – TYPES OF
ECONOMIES
Types of
Economi
es
On the basis of the On the basis of the
stage of Nature of the
Development Economic System
Develop
ed Capitalis
economi m
es
Developi
ng Socialis
economi m
es
Mixe
d
II. DEVELOPED AND DEVELOPING ECONOMIES
1 . A Developed country is defined as a country which has a high real per capita income.They enjoy a
higher standard of living e.g. USA, Canada, New Zealand etc.
2 . An Underdeveloped or Developing country is defined as a country in which real per capita income is
low and which has the potentiality of development.
III. DIFFERENCES BETWEEN DEVELOPED AND DEVELOPING ECONOMIES
BASIS DEVELOPING ECONOMY DEVELOPED ECONOMY
A developing country is a country in which A developed country is defined as the
real per capita income is low and which country which has a high real per capita
Meaning
has the potentiality ofdevelopment. income.
Poor quality of human capital, lowliteracy Better quality of human capital, high
Human ratio, low level of education, inadequate literacy ratio, higher education level,
Capital health facilities and poor sanitation adequate availability of health and
facilities. sanitation facilities.
The growth rate of population The growth rate of population indeveloped
Population indeveloping economies is very high dueto countries is around 0.6 to 1 percent per
Growth its prevailing high birth rate and falling annum. So, they have less density of
Rate death rate. The population inthese population. People can enjoy more
countries is increasing by 2 to 3 percent resources.
,per annum.
, IV. TYPES OF ECONOMIC SYSTEMS
Different countries follow different economic systems, such as Capitalistic, Socialistic and Mixed
Economies.
“An Economic System is defined as a sum total of all those devices and institutions through which
economic choices are made and scarce resources are used for the purpose of satisfying various human
wants.”
V. CAPITALISM
1. Definition of Capitalism or Capitalistic Economy
i. A Capitalistic Economy is an economy in which productive resources are owned by private
individuals who use these resources to earn profits and in which the state (government)
intervention is minimum so that the economic activities are mostly unplanned and uncoordinated.
ii. As Capitalistic Economy is based on free enterprise with minimum interference by the
government, it is also known as Free-enterprise Economy, Market Economyor Laissez-faire
Economy.
iii. The Capitalistic system is the oldest economic system, it is practised today in a large number of
countries like the USA, UK, France, Canada etc.
2. Features of Capitalism or Capitalistic Economy:
i. Private Property
This is the essence of Capitalism. This right means that private property such as factories,
machines, plants etc. can be owned by private individuals and companies. The things covered
under this right are as follows - Every individual can acquire any amount of property, use and
sell the property and productive resources.
However, this right is not absolute and unrestricted, there are some government restrictions
imposed on it.
ii. Right of Inheritance
The right of inheritance means that the property owned by an individual can be legally passed
on to his legal heirs like sons and daughters.
This provides a powerful incentive to the people to save and accumulate wealth
iii. Freedom of Enterprise and Occupation
Freedom of Enterprise means that the private enterprises are free to use their productive
resources to produce a product of their own choice.
Freedom of Occupation implies that the individuals are free to choose an occupation of their
choice in accordance with their education, talent, ability and efficiency. They can move from
one job to another or from one place to another in search of better opportunities.
iv. Freedom of Choice for Consumers
Consumers are free to buy and consume goods and services of their choice.
It is the choices and preferences of the consumers that determine the nature and quantity of
goods which are produced in the economy and hence the consumer is regarded a Sovereign or
a King in a Capitalistic Economy.
v. Price Mechanism
Price Mechanism is the process through which prices of goods and services are determined by-
