Types of economies
ALLOCATION OF LIMITED
RESOURCES
RESOURCES – scarce
 WANTS – unlimited


The function of an economy is to find ways how to
allocate these scarce resources, basically answering the
following questions:
The main questions an economy should
provide answers to:
WHAT
to produce?
WHO
to produce for?
HOW
to produce?
WHY
to produce?
THREE TYPES OF ECONOMIES

MARKET ECONOMY

PLANNED ECONOMY

MIXED ECONOMY
IN DIFFERENT ECONOMIES WHO
Owns
 Provides
 Allocates
 Distibutes
 Compete
 Decides
 Ensures
 Passes

......
scarce resources?
 against each other?
 fair competition?
 what to produce, how
and who for?
 laws?
 means of production?
 goods and services?
 police, defence,
judiciary ?
 minimum standard of
living?

Owns means of production
 Provides a minimum standard of living
 Owns scarce resources
 Allocates scarce resources
 Distributes goods and services
 Compete against each other
 Decides what to produce, how and who for
 Ensures fair competition
 Passes laws
 Ensures police, defence and judiciary

PLANNED ECONOMY
(command e.)
State owns the means of
production
 Decides about the
allocation of resources
 More equal distribution of
goods and services
 No competition among
companies

RB
 Read p. 30 (Planned &
Market E.)
MARKET ECONOMY
(capitalist, free enterprise e.)
Government intervention
at minimum
 Private individuals and
businesses own the
means of production
 The main aim is to make
profit and the businesses
compete against each
other
 The market mechanism –
the law of supply and
demand decides what to
produce, how to produce
and who gets what is
produced

MARKET OR PLANNED
ECONOMY?
demand and supply
 state-owned resources
 competition
 production of standardised goods of lower quality
 profit
 equal distribution of wealth in society
 wider choice and better quality of goods
 production for need, not profit

MIXED ECONOMY
It is a mixture of the planned and market economy
 The country’s e. is devided into two parts or sectors
according to ownership:
 PUBLIC SECTOR – owned by the government
 PRIVATE SECTOR – owned by private individuals and
businesses
 Resources are allocated by the forces of supply and
demand
 The government regulates the market





How do mixed economies work?
Think about some of the goods and services that you have used in
the past few days. Are they part of the public or private sector?
When we purchase smth from a private retailer we assume that
we are contibuting to the private sector. When, however, we use
a government service, we enjoy smth that the public sector
provides often mistakenly believing that such a service is free of
charge.
Let’s examine this idea through the example of taking a ride in a
taxi cab. Imagine that you took a taxi on a rainy afternoon. When
the ride is over, you paid the driver, who, after subtracting his
costs, made a small profit on driving you in his privately owned
car. This seems like a transaction that took place exclusively in
the private sector.
Although it is not obvious at first glance, government plays an
important role in regulating traffic in general and the work of
cab drivers in particular. The roads that taxis drive on are also
public goods paid by the taxes that people – like the cab driver –
pay on their income.
No private business could exist without public goods and
services: they are protected by the police, use streetlights,
their employees are educated in the public school system
and kept healthy or cured in public hospitals.
 At the same time, all governments want to encourage the
success of private businesses, because without their
contribution to the budget, in the form of taxes, public
goods and services would not exist.

Boglarka Kiss-Kulenović
Taken from the Coursebook English for Business 1
MIXED ECONOMY
•
•
•
•
•
Some resources are a_______ by the state (public sector), and some
by the market system (private sector).
The public sector s______ public goods by local or central
government (goods used by general public, paid through
_________).
The state usually p______ a minimum standard of living for the poor.
The government e______ fair competition.
In the private sector means of production are o_______ privately.
MIXED ECONOMY
PRIVATE SECTOR v. PUBLIC SECTOR
• private individuals
own r________
• firms make d______
•firms allocate r_____
in response to demand
→RB, p. 30
• the government
(central or local) owns
and allocates r _____
• the government
supplies p_____ g_____
and s______
•the government
ensures a level p____
f___

CE → CAPITALIST OR MARKET ECONOMY

PE → PLANNED ECONOMY

ME → MIXED ECONOMY
BIDDING SENTENCES
1.
In CE resources are allocated by the government.
2.
Public goods in ME are provided free when used and are
paid for by taxes.
3.
The role of the government in CE is to pass laws, plans and
organises the production process.
4.
In ME, in the private sector, production decisions are made
by firms in response to the demands of consumers, and
individuals are allowed to own the means of production.
5.
In PE, production is for need rather than for profit.
6.
In ME the state usually provides a minimum standard of
living for the poor.
7.
In PE there is more equal distribution of income and
wealth.
8.
In the CE the government doesn’t ensure a level playing
field.
9.
In ME, the public sector (central or local government) is
responsible for the supply of some public goods and
services.
1.
2.
3.
4.
5.
All the countries with PE have a good standard of living.
In ME some resources are allocated by the government and
some by the market.
Private firms are interested in financing national defence
and police.
Laissez-faire economy is another name for planned
economy.
Since the only interest of firms in CE is profit and lower
costs, they often tend to sacrifice public interest.
SPEAKING TASK
MAKE A PRESENTATION ON EACH TYPE OF
ECONOMY IN GROUPS OF THREE. USE THE
INFORMATION IN THE GRID.
Student 1: market economy
Student 2: planned economy
Student 3: mixed economy

USE YOUR NOTES TO MAKE A SHORT
SUMMARY ON ONE TYPE OF ECONOMY
FILL IN THE GAPS.






After World War II there were several _________________ economies
in the world, _________________ present there are only a few left.
Both Croatia and Sweden are _________________ states, Sweden,
however, provides a much higher _________________ of living to its
citizens.
In Croatia some resources are _________________ (e.g., silver) and
some are _________________ (e.g., lumber).
In the _________________ sector the state _________________ decisions
about what to produce.
The _________________ of goods and services is more equal in planned
economies, the standard of _________________, however, is lower than
in _________________ or _________________ economies.
The majority of US and Canadian universities require that foreign
students provide proof of their _________________ abilities, i.e., that
they can support themselves while studying there.
CHANGE THESE VERBS INTO NOUNS:
VERB
 need
 want
 produce
 own
 allocate
 compete

NOUN
VERB
supply
demand
disribute
plan
intervene
NOUN
WRITE TRUE AND MEANINGFUL
THE FOLLOWING TERMS:
SENTENCES USING
economic system, allocate
____________________________________________________
_____________________
 resources, own
____________________________________________________
_____________________
 decide, market mechanism, market economy
____________________________________________________
_____________________
 mixed economy, two sectors


Source of exercises: “English for Business”, Kiss-Kulenović, Lekaj-Lubina, Lumezi Linčir, Planinšek-Čikara