In a traditional economy, how the resources are distributed is predicted by the habits and traditions practised by the society. Here, the Basics of Economy is guided by a pre-determined force and everyone automatically knows where they fit in. Occupations are distributed according to heritage and there is little room for growth and innovation as new ideas are usually scorned and perceived as a threat to a way of life.
In the traditional economy, there is stability and predictability and entrepreneurs are rare thus, the standard of living is significantly low. The government plays a lot of role in the command economy. Instead of allowing tradition and habits to dictate the economy, a central government is elected or appointed to dictate the Basics of Economy. Everybody is then obliged to follow the economic decisions made by the government or their interest groups regardless of their differing or preferred stands.
The Market economy on the other hand is controlled by the forces of demand and supply. What to produce, for whom and needed quantity is all left in the hands of the market, the people. This economy permits growth and change based on the various needs of the consumers. The distribution of wealth in a market economy is often not balanced since it is tallied to the wavering needs of the market forces.
Communism captures the command economy. A central unit owns all and attempts to redistribute the wealth equally to all. The advantages and disadvantages of this approach weigh each other out. Capitalism works well with the market economy, the direction and growth is left to the consumers and business owners. By promoting competitive living, it takes the resources of any society and puts it to good use thereby promoting efficiency and flexibility. A major setback however could be the insensitivity of this type of economy to a balanced distribution of needs.
The Basics of Economy is similar in today’s major economies, most practicing socialism attempt to mix the command and market economies. In this arrangement, a central unit controls essential public demands while non-essential demands are left to compete with the harsh forces of demand and supply. Mixed economies takes the best of all the other economies, combines them in order to meet the demands of any society on a much larger scale.