1. What is an economic system?

Answer: An economic system is a means by which societies or government organize and distribute available resources, goods and services across a geographical location. There are varieties of economic system in use throughout the world today. Example of some of them are capitalism, socialism, communism, etc.

An economic system is an economic order, a system of production, resource allocation and distribution of goods and services within a defined territory. It involves the corporation of the various institutions, agencies, entities, decision making processes. All economic structure are based on three different questions, which are what to produce? How to produce? and for whom to produce?. Economic system involves how these agencies and institutions are linked together and how informations flows between them.

What characterizes an economic system is the way in which goods and services are produced and distributed. Human beings are not self-sufficient, they need to produce a number of things to satisfy their needs, from shelter, food to transportation and communication. Each society, due to a series of conditions, finds an alternative way to define who will produce, how it will produce and how the goods resulting from this process will be distributed.