In a free market economy, the invisible hand of supply-and-demand market forces defines what is produced, in what quantity, and

at what price. A market economy is a type of economic system in which the trading and exchange of goods, services and information takes place in a free market. A market economy may therefore also be known as a free market economy. The phrase is typically applied to countries or administrative regions that follow this approach. Since free markets are governed by the law of supply and demand, the market itself will determine the price of goods and services, and this information will be made available to all participants. Businesses can decide which goods to produce and in what quantity, and consumers and businesses can decide what they want to purchase and at what price. The opposite of a market economy is a planned economy, where the government decides what to produce, in what quantity, and to be sold at what price. Mixed economies blend market and planned economies, meaning that the government will have some role in regulating the market, but all other activity will be driven by the decisions of buyers and sellers. Since the government will always have some level of regulatory control, no country operates as a free market in the strict sense of the word, but we generally say that market economies are those in which governments attempt to intervene as little as possible, while mixed economies include elements of both capitalism and socialism.

The main characteristics of a market economy are its flexibility and decentralized nature. This type of economic system is more apt to cope up with ever-changing market trends, making it faster and more reactive. The role of the national and state governments in the market economy is debatable, although it has been found that government interventions are sometimes necessary. In these cases, the government mainly deals with the formation and implementation of rules and regulations and ensures that monopolistic behavior does not obstruct competition in the marketplace. Regardless of the governments role, decisions made in a free market economy are primarily made by the invisible hand of market forces and not mandates issued by the government.

In a Command Economy or Planned Economy, the central or state government regulate various factors of production. In fact, the government is the final authority to take decisions regarding production, utilization of the finished industrial products and the allocation of the revenues earned from their distribution. The government-certified planners come second in the hierarchy. They distribute the works among the labor class, who actually undergo the toiling part of the entire process. China and former USSR and are perhaps two of the best instances of Command Economy. Though many countries now-a-days are switching off from Planned Economy to Market or Mixed Economy, yet nations like North Korea and Cuba are some countries where Planned Economy still exists in full form. In case of a Command Economy, both state-owned and private enterprises receive guidance and directives from the government regarding production capacity, volume, modes of production and course of their actions. Planned economic system is broadly segregated into two groups Centralized and Decentralized. The centralized or centrally Planned Economy, as prevalent in former

Soviet Union, is a more familiar concept between the two. The decentralized Command Economy, on the other hand, is more theoretical in nature with little or no application in the actual economic spheres. Characteristic features of Command Economy: By nature, a Command Economy is more stable, guaranteeing constant exploitation of the existing resources. It is least affected by financial downturns and inflations. In a carefully planned Command Economic system, both surplus production and unemployment rates remain at a reasonable level The steady nature of Planned Economy encourages investments in long-standing project-related infrastructures without any possibility of financial recessions. Command Economy is just opposite to the concept of Market Economy, with respect to the basic money-making approaches. While Market Economy tends to multiply the wealth of a nation through the gradual process of evolution, Command Economic system prefers deliberate planning of the entire money-making process for better results. In fact, such sincere economic planning in the long run proves beneficial to improve the economic conditions of a country. Command Economy emphasizes more on collective benefits, rather than the requirements of a single individual. Under such circumstances, rewards, wages and other monetary benefits like bonus are distributed on the basis of the joint rendering of services. This is how Planned Economy actually eradicates the profit-making at individual levels.

Traditional Economy is a system where the allocation of available resources is made on the basis of inheritance. As a deep-rooted economic theory with well-built social set-up, Traditional Economy generally makes use of prehistoric instruments and techniques.

From time immemorial, conventional and age-old human occupations like agriculture remained the focal point of interest for Traditional Economy. This is perhaps the only economic theory, which has evolved historically in certain countries. However, all nations having Traditional Economy these days, are fast switching off to more contemporary concepts like Mixed Economy, Command Economy or Market Economy, to keep pace with the modern economic trends and happenings. Irrespective of the old approaches of Traditional Economy, the concept is still prevalent in some under-developed South American nations like Papa New Guinea and Brazil, and in a handful of other African and Asian countries. In fact, Traditional Economy can be called as the economy of the ingenious population of the world like the Pygmies belonging to the Congo region in Central Africa. As per a World Bank estimate, this type of economy is still prevalent among 400 million indigenous people across the world. So, it is not at all an extinct economic concept in present times. There are of course a handful of benefits derived from Traditional Economy. It actually nurtures a feeling of unity among individuals, helping in the development of a social bond and sense within them by reducing mutual hostilities. Consequently, people feel psychologically more free, comfortable and secured, which increase their working abilities million fold. This in turn, brings down the rate of unemployment. Moreover, since the entire population is engaged in activities of some kind or the other, their mind never sit idle to plan criminal activities. Hence, there is a significant decrease in the rates of crime as well. To sum up, Traditional Economy permits people to enjoy more independence against minimum or no financial expenses. The concept of Traditional Economy is all about popular autonomy, where productions take place as per the demand generated. Hence, primitive human occupations like animal grazing, gathering, hunting and cultivation form the basis of this economy. However, the surplus food production is not consumed but used for commercial activities.

Mixed Economy can be defined as a form of organization where the elements of both capitalist economy and socialist economy are found.

Simply in such type of economy there is the presence of private economic freedom with centralized planning with a common goal of avoiding the problems associated with both capitalism as well as socialism. In this system the freedom in the economic activities are influenced by the Government's regulation and licensing policies. Existence Of A Mixed Economy It is too difficult to define a country's economy as capitalist, socialist, or mixed. But as the experiences tell the role of the Government has increased very fast after the worldwide depression. The was one of the best examples of the Capitalist economy is considered as a mixed type today. Mixed Economy An Economic Mixture In a mixed type economy, both the private ownership as well as the state takes part in the means of production, distribution and other types of economic activities. The mixed economy allows private participation in the field of production in an environment of competition with an objective of attaining profit. On the contrary following to the socialism features it includes public ownership in production for maximizing social welfare.

Advantages and Disadvantages of Market and Mixed Economies In this discussion we will discuss some of the advantages and disadvantages of both market and mixed economies. To begin our discussion we will first talk about the advantages of a market economy. A market economy is known as a "free market economy". It is controlled by the law of supply and demand which in return will determine the price of services and goods. In a market economy the exchange of goods, services, and information take place in a freely according to the supplier and the buyer. Which means the entire market is merely driven by the sellers and the buyers with very few government regulations. The positive on this type of economy is sellers can sell according to the demand of buyers, in return buyers pay for what they want, not necessarily what the government makes available to them. The downside to a market economy is there are sometimes needs for regulations to keep certain sellers from creating a monopolistic behavior. (Economy Markets, 2009) Another problem with a market economy is certain goods and services like law, medical, and

education are inadequately provided. Medical expenses can be outrageous due to lack of regulations on cost. (Socyberty 2009) A mixed economy permits private participation in manufacturing and production which in return allows healthy competition that can result in profit. On the other hand it also contributes to public ownership in fabrication and manufacturing which can take full advantage of social welfare. In a mixed market economy this system is governed by licensing and regulation policies. However, because the public also has control of the economy this facilitates transition. (Economy Markets, 2009) The advantage of this type of market allows competition amongst providers with regulations in place to protect society as a whole. With the government being present in the economy it brings a sense of security to sellers and buyers. This security helps maintain a stable economy. Some disadvantages of a mixed economy are unsuccessful regulations may paralyze features of production. This in return can cause the economic balance to tilt. Lack of price control management can cause shortages in goods and can result in a recession. A perfect example of this type of poor management in price control is the recent gas shortage experienced in the United States. (Leonard 2006)