[This is part of the series: The Complete Guide To Economics 101.]
There are many different ways of organizing an economy.That is, allocating the scarcity of goods and services that exist in the world.
Most types, however, fall under two broad categories.
- A market economy, or sometimes called a “free-market” economy.
- And an economy where resources, production, and allocation are done by a third party.
Many times, the organization of the economy by a third party is done by the government.
A Market Economy is where individuals, and businesses owned by individuals, are free to harvest resources, allocate resources through prices, and buy and sell as they see fit.
Individuals can choose what they want to buy, what they are willing to pay for, and what businesses they want to start.
Businesses can choose what goods to manufacture and market, and what prices they will charge.
A market economy is nothing but the collective result of millions of people, making billions of decision, as they live every day of their own accord.