The world has several different economies operating simulotaneaouly. Included are many different economies such as the market economy and the command economy. Throughout history, there have been three main economic formulas; the traditional or feudal, the command economy and the market economy. The market economy is the form practiced in the US and in most of the industrialized Western countries. Many current market economies have become more inclusive of some of the command economies theories. This combination of market and command is called a mixed economy.
The oldest of these three main economies is the traditional economy. The traditional economy operates with the family produing its own goods and services for their personal consumption. This format creates the least surplus and only a limited need for a market of any goods or services. This type of economy can still be found in many places around the world. Traditional economies are most common, however, in the rural and the least developed regions of the world. .
A command economy, on the other hand, is much more complex. The answers about economic questions, such as, what and how much to produce, are all made from a single central government authority. The government also decides what areas to focus on and further develop. Even the prices of everyday goods and services fall under the government's control. The main goal of the command economy theories is the promotion of social development. Therefore, the cost of production is not reflected in the prices the consumers pay. For example in a command economy the government will charge a quarter of the production cost of a staple good in order to maintain the consumer's supplies. .
In a market economy the laws of supply and demand control the factors of the economy. The decisions about what and how much to produce, where to focus economic attention, and what prices to charge for goods and services are the consequence of these laws of supply and demand, and the market.
