The economic system is understood as set of the processes defining rules of functioning of national economy. Today there are three main types of economy, each of which has the advantages and shortcomings.
Planned economy
The planned economy which is also called command represents a system in which the state manages all economic processes. Production of the country at such system is completely controlled by the central power, she makes decisions in the field of distribution of goods and services in the territory of the whole country. The command economy also means planning of activities of one and all sectors of economy, distribution of resources and end products.
The planned economy can consist of the state and private productions, all of them in the work submit to the general plan. Strong centralization of economic processes practically excludes influence of market forces.
The main lack of such economy is its inability to react quickly to changes in structure of supply and demand.
Market economy
The market economy is the most widespread system in the world, it is also called capitalist and free. This type of economy means the minimum intervention of the state in economic processes. The main engine of economy are consumers and their demand and also the offer satisfying it. An important role is played also by market expectations, they define in what direction the national economy will develop. The role of the state at market economy comes down to maintaining the stability of the market allowing to carry out the economic activity. The free economy is regulated by the law of supply and demand. They define what goods and services and in what price will be present at economy. Because of low state control the people can dispose of the money as they want. For example, they can risk, having started own business, to earn on it big money or, on the contrary, to lose them. Actually the countries with completely market economy do not exist. In each country living in such system, the state to a degree is engaged in control of certain economic processes.
Mixed economy
This type of economy represents mix market and planned. This system prevails in the countries where in the course of adoption of economic decisions equally important role is played both by the state, and business. It is characterized by the flexibility in some cases and strict state control in others. The mixed economy most often arises in those countries which seek to balance a wide range of political and economic views.