Types of Economy Systems
A) Free Market Economy
B) Centrally Planned or Command Economy
C) Mixed Economy
D) Islamic Economy
A) Free Market Economy / Capitalist / Laissez Faire
Free market economy is an economy system was operation without government intervention.
Features:
1. Decisions are taken by individual and firm with no government intervention.
2. It usually associated with a pure capitalist, where land and capital are privately owned.
3. The price mechanism used in this system whereby changes in price in response to change in demand and supply have the effect of making demand equal to supply.
Advantages:
1. Individual are free to make their own economic choice
2. Freedom to workers and firm to choose where to work and what production methods to use.
Disadvantages:
1. Existence of wide gap between the rich and the poor.
2. Existence of unemployment problem.
B. Centrally Planned or Command Economy / Socialist Economy
Central Planned Economy is economy was fully controller by government.
Features:
1. Decision are taken by the government or central authorities
2. It usually associated with a socialist or communist economy system, where land and capital are collectively owned. The government or central authorities plans the allocation of resources.
Advantages:
1. Decisions of allocation of resources always are in the interests of society as a whole and with specific national goals.
2. Unemployment could be largely avoided if the government carefully planned the allocation of labour.
3. Same income distribution
4. Produces the goods and services at efficiency level.
Disadvantages:
1. Mistake decide in economy (decision made by some people only)
2. Technology and innovation are undeveloped because all productions are decided by government.
3. Mixed economy
Mixed economy is a economy system that incorporates a mixture of private and government ownership or control (capitalism and socialist)
Features:
1. This system use market mechanism and allow government intervention in economy activities.
2. Price level determine by price’s mechanism but basic economy’s problem resolved together between government and private.
3. Individual and firm free to have properties.
Advantages:
1. The government will try to reduce gap of income between rich and poor people. ( taxes and subsidies)
2. Government will also control the existence of monopolies.
Disadvantage:
Business freedom is not totally offered for enterprise.
4. Islamic Economy
Economy which uses Allah's creation natural resources with most efficient and fair way based on Islamic laws.
Features:
1. Al Quran and Hadith was the main source in Islamic economics’ activities.
2. Individual free to own property
3. Individual no give priority to profit in business
4. Fair competition permitted
5. Free to decide in economics
Advantages:
1. Good in the world and afterworld
2. Free competition
