Types of Economic System
Socialist
economic system
Characteristics:
1)Price mechanism is less
important
2)Less freedom of choice
3) No competition
Advantages:
1) Social welfare is served first.
2) Allocation of wealth depends
on the society's needs.
Disadvantages:
1)No or less economic freedom
and consumers' sovereignty
2)Waste of resources.
Countries that practice this
economic system:
1) North Korea
2) Cuba
3) China
4) Vietnam
5) Cambodia
Capitalist economic
system
Characteristics:
1) No or minimum government
intervention
2) Laissez-faire
3) Competition is highly
practiced
Advantages:
1) Society has economic
freedom
2)Enhance foreign direct
investment
Disadvantages:
1) No public goods are
produced
2) Existence of monopoly power
3) The poor is discriminated
Countries that practice this
economic system:
1) United States of America
2) Canada
3)Japan
Mixed economic system
Characteristics:
1) Both public and private sectors
produce goods and services
2) Production of both private and
public goods
Advantages:
1)Society has economic freedom and
social welfare is fulfilled,
2)Both public and private interests
are served.
Disadvantages:
1) Allows excessive intervention of the
government influenced by short-term
political factors and bring inefficient
outcomes
2)Government limit company sizes to
reduce monopoly power
Countries that practice this
economic system:
1)United Kingdom
2)Malaysia
3)France
4)Singapore
Islamic economic
system
Characteristics:
1) Production of goods and services
based on shari'ah principles
2)Production and services depends
on hierarchy needs.
Advantages:
1) The poor's interests are served
first.
2)Production of goods depends on
classifications goods in Islam
Disadvantages:
Countries that practice this
economic system:
1 )Malaysia
2) Saudi Arabia
3) Bahrain
4) Oman
5) Qatar
6) Jordan
7) Indonesia