Different countries have different methods of tackling the economic problem. There are three main types of economy. A market or capitalist economy is where resources are allocated by prices without government intervention. The USA and Hong Kong are new examples of market economies where firms decide the type and quantity of goods to be made in response to consumers. An increase in the price of one good encourages producers to switch resources into the production of that commodity.
Consumers decide the type and quantity of goods to be bought.
A decrease in the price of one good encourages consumers to switch to buying that commodity. People on high incomes are able to buy more goods and services than are the less well off. In a command-planned or socialist economy the government owns most resources and decides on the type and quantity of a good to be made. The USSR and North Korea are examples of command economies. The government sets output targets for each district and factory and allocates the necessary resources.