Light

Economic Systems

Definition

An economic system defines how a society organizes its resources to meet its citizens' needs and wants. It determines what goods will be produced, how they'll be produced, and who gets them.

Analogy

Imagine you're playing an online multiplayer game with resources like wood, gold, food etc. How you gather these resources (hunting vs farming), how you use them (building houses vs creating armies), and who gets what (sharing equally among players vs based on contribution) - this is similar to an economic system in real life!

Related terms

Capitalism: An economic system characterized by private ownership of goods and services with free market competition.

Socialism: An economic theory advocating for collective or governmental ownership and administration of means of production and distribution of goods.

Mixed Economy: An economy that combines elements from different economic systems such as capitalism and socialism.