An Economic System is a set of methods or ways, people choose to interact between buyers and sellers, and the allocation of goods and services. The idea of who directs the econy, and who owns the production side. The idea of what is produced and sold among people. Economic System is the overall idea of what happens in an economy. There are 3 general types of economic systems; Command, Market, and Traditional. Command system is usually found where there is a communist of socialist government. In a command system the government controls inputs and outputs of the economic system. They choose what is produced, and which people get that certain good and how much of it. They have total power. For example, they can have factories just make bread all year and nothing else. And then they can choose that this family gets 1 loaf a week and this other family get 2 loafs etc. A Market Economy is typically found in a capitalist country, it is a free market. People act upon self-interest, and make the goods the buyers want the most, and in the end want to make as much money as possible. There are the buyers and sellers. The sellers get there resources from the resource market (buyers are owners of resources), where they find labor land etc. Then the sellers produce goods, and sell the goods in the product market. At the product market the buyers use the money they got to sell there resources and buy the goods they want. The money made on selling products is the sellers revenue. Goods that are made and produced depend on Supply-Demand idea, and self-interest (what makes the most money.
A traditional economic system is one that bases all decisions off of its past and its tradition. Resources are distributed based off of who received them in the past and by inheritance. The society is self-producing; from subsistence farming to making clothing from their own resources. An example of a traditional economy that has not been replaced by a command or market system is the Amish.
Most command systems have failed to the market system.

Test your knowledge!
What kind of economy is the United States of America?
a) Command Economy
b) Market Economy
c) Traditional Economy
d) Failing Economy

The answer is b. The United States of America is a free market economy.