An Economy is the system in which available resources are distributed to meet society’s wants and needs. In deciding how to allocate these scarce resources, three questions must be answered: how will it utilize its resources efficiently? Which combination of goods and services should it produce? And, how much of the total goods and services produced should it distribute to individuals?
Countries or societies must answer these questions regardless of the type of economy they operate. Types of economy vary depending on the level of government intervention. The four basic types of economies are:
Traditional Economies – subsistence farming, bartering system; no government intervention
Planned/Command Economies – those in which all economic decisions are made by the government
Free Market Economies – those with no government intervention
Mixed Economies – those with a mixture of Planned and Free Market. In practice, all economies are mixed economies.
The main players in an economy are households/individuals, firms and the Government.