Students should think of a market-based economic system as one belonging to the people. In a perfect market-based economy, the government sets no rules and regulations regarding labor or production. Seventeenth-century economist Adam Smith's principles of laissez faire and "the invisible hand" guide people into making the best decisions: In a market economy, everyone acts in their own best interest, which in Smith's theory is believed to make everyone else better off. Perfect competition causes prices to be in equilibrium with the forces of supply and demand.
A command economy is one in which the government has full control over the production of goods and services. The government determines how much of a good to produce and who should produce it. In countries that prescribe to this type of economy, including Cuba and North Korea, people must sell products at a price determined by the government.
A mixed economy includes parts of a command and market economy. The United States, Norway and England are all examples of a mixed economy: Though people can produce whatever they wish and set the prices for their goods and services, the government imposes certain regulations over commerce. For instance, products must meet safety standards and businesses must procure a permit to engage in commerce.
In a traditional economy, people rely on long-standing social norms and culture to guide business decisions. Most traditional economies are farm-based: In order to survive, people rely on whatever they produce within their neighborhood. Bartering--exchanging one item for another as a way of doing business--is common in a traditional economy.
Think of "market" economy as synonymous with "me" economy. When you try to remember the phrase, "laissez faire" think of it as "lazy" government because of its non-existent involvement in the market. For a "command" economy, think of c-words: associate the definition with "Cuba," a country whose government controls all of the resources or "communism," a government system that controls the allocation of resources. Use visual clues and story lines as well. For instance, for a traditional economy, think of banana. Let that image jog your memory about how traditional economies are typically agrarian.