The document discusses different types of economic systems and the concept of a mixed economy. It explains that a capitalist economy relies on individual decisions and market forces, while a socialist economy relies on decisions made by the state through central planning. Most modern economies are mixed economies, with elements of both private enterprise and state involvement. The concept of a mixed economy emerged as a compromise between purely capitalist and socialist systems.

2. Capitalist Economy In a capitalist economy, most of these decisions are made by the citizens acting individually. In capitalism, individuals are driven by self-interest, and market forces direct and co-ordinate the decisions they make. As a result, capitalist economy is often referred to as a ‘market’ economy. Socialist Economy In a socialist economy, on the other hand, most of these decisions are made by citizens acting through the state, which co-ordinates and implements these decisions through central planning and command. In fact, a socialist economy is often referred to as a ‘planned’ or ‘command’ economy. Nowadays, most economies are known as ‘ mixed’ economies because, in reality, both market and state play a substantial role in them.