COMPONENTS OF

ECONOMIC SYSTEM
Presented By:

Menuka Watankachhi

Supervised By:

Mr. Sanjay Kumar Srestha

ECONOMIC SYSTEM
An economic system is the combination
of the various agencies, entities that
provide the economic structure that
defines the social community. These
agencies are joined by lines of trade and
exchange along which goods, money etc.
are continuously flowing.

COMPONENT OF
ECONOMIC SYSTEM

Capitalism/Free Market Economy

Planned/Command/Controlled/Socialist
Economy
Mixed Economy

FREE MARKET ECONOMY

Also known as CAPITALISM ECONOMY

Minimum intervention of state

Customer have money power

Private ownership

Competition based on DEMAND and

SUPPLY
Invariably lead to inequalities of wealth and
income
Followed by USA, Germany, France, Japan,
etc.

SOCIALIST ECONOMY

Also known as PLANNED/COMMAND

ECONOMY
Economic activities determined by a Central
Government Plan
Government owns and controls
factors/resources of Production
Central Planning and Control of business
Less Freedom of choice to Customer
Social benefit
Followed by Vietnam, North Korea, Cuba, etc.

DIFFERENCE BETWEEN CAPITALIST

AND SOCIALIST ECONOMY
Capitalist Economy
1.

Resources are owned by private

individuals.

Socialist Economy
1.

All economic resources are

owned by the state.

2.

Competition is an essential
part.

2.

Co-operation is an essential
part.

3.

Maximization of profit is the

principal objective.

3.

Social welfare is the chief

motive.

4.

Price is determined by the price

mechanism.

4.

Price is determined by the

central planning authority.

5.

Freedom of consumption and

freedom of production.

5.

Loss of economic freedom.

6.

State regulated economy.

6.

Minimum intervention by the

government.

7.

7.

Concentration of economic
power in the hands of the
capitalist class.

Concentration of economic and

political power in the hands of
the government.

8.

The idea of equality aims at

establishing a classless society.

8.

Inequality in the distribution of

income leads to class conflict.

MIXED ECONOMY

Mixture of both Government and Private

sectors
Countries moving from Command
Economy to Market Economy
Producers and Consumers have
Sovereignty
Contributes towards the welfare of society
Greater market reliance
Followed by most of countries
Nepal has Mixed Economy

CONCLUSION
Our country Nepal relied on the mixed
economy system to speed up the
development process from the very
beginning of its planned efforts to
economic development.

REFERENCES

Hands out provided by Sanjay sir

Business Environment In Nepal: Prem R.
Pant
Websites