There are three types of economic systems: the free market economy, the centrally planned economy and the mixed economy.
The free market economy is a system in which all economic decisions regarding the production, distribution and pricing of goods and services are made by the market laws of supply and demand.
It is based on private ownership of capital and it is also called capitalism. An example of free market economy is Singapore and other countries in South East Asia.
The centrally planned economy is based on state ownership of capital, it is also called socialism.
All the economic decisions are made by the government. Examples of centrally planned economy are the Soviet Union and China of the 20 th century.
The mixed economy combines elements of both free market and centrally planned economies.
Private companies are free to compete for most goods and services. Public transport, education, health care and utilities are traditionally provided by government.
Examples of mixed economy are the USA, UK, Italy.
Commerce includes all the activities and procedures involved in buying and selling goods. Commerce occurs between producers, who make things and consumers, who buy things. It refers to the distribution and sale of the goods and can be divided into two main areas:
• Trade , which is the activity of buying and selling goods for money.
It can either take place within a country or between countries. Home trade deals with the activities of wholesalers and retailers, while foreign trade deals with the activities of importers, who buy goods from other countries and exporters, who sell goods to other countries.
• Services , which make the exchange of goods possible, such as warehousing, retail, transport, communication, insurance, banking, marketing and advertising.