What is Economy? Types of Economy (Centrally Planned Economy, Market Economy, Mixed Economy) Example


What is Economy? 
Economy is a system by which people earn their living. It is an area of production, consumption, distribution and trade. The nature by which people earn their living can be seen through the nature and level of economic activity performed. 

Types of Economies
There are three types of economies (i) Controlled or Centrally Planned Economy (ii) Free Economy or Market Economy and (iii) Mixed Economy
Let us now discuss different kind of economies in brief. 
(i) Controlled or Centrally Planned Economy: These are the economies wherein the economic decision regarding production, consumption, etc. are controlled by government or some central authority. In this kind of economy govt. decides the prices of commodities. Example of such economy is China, North Korea. Main motive of such economies is to maximize social welfare.
(ii) Free Economy or Market Economy: These are the economies wherein the economic activities are controlled by the free play of Market forces. Market deter the prices of goods and servi through the forces of demand and supply. Economic decisions are driven by profit motive. USA and UK are the example of such economies.
(iii) Mixed Economy: These are the economies where economic activities are governed by Free play of Market forces but are regulated by government. These economies focuses both on profit maximization and social welfare. In such economy, prices of goods and services is determind by market but government regulates the prices of essential goods. India is an example of Mixed Economy. 

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