Command Economy Vs Free Market Economy Essays On Success

Why to Use Market Economy Essay

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There are four types of economy, command, market, mixed, and traditional. A command economy is an economy where government control the economy. In market economy is there is a minimum amount of government control. A mixed economy is an economy that blends command and market economy together. A traditional economy is an economic system that is often used in rural areas. Among these four economic system, Mr.Robbins should use market economy for his new island, because market economy bring many benefits to a country.

First, a market economy pushes businesses to make cheaper, better quality products so more people will buy the product that is being produced. The more options on the market, the more competitions. This results in higher profit…show more content…

There are four types of economy, command, market, mixed, and traditional. A command economy is an economy where government control the economy. In market economy is there is a minimum amount of government control. A mixed economy is an economy that blends command and market economy together. A traditional economy is an economic system that is often used in rural areas. Among these four economic system, Mr.Robbins should use market economy for his new island, because market economy bring many benefits to a country.

First, a market economy pushes businesses to make cheaper, better quality products so more people will buy the product that is being produced. The more options on the market, the more competitions. This results in higher profit for companies and businesses. When companies have more profit they can expand and make new products. If the company can produce new and better products, than it will bring even more profit in for companies. In a market economy, companies need profit to survive and stay in business. No profit means no money which eventually leads to the business or company going out of business. In the end, high profit from a market economy benefit the business and motivate them to expand their business.

Second, market economy bring many benefits to the people, because people are the one who make decisions in the market economy. One of the benefits that market economy bring to the people is better quality products for less money. For example, when Apple

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A:

Market economies and command economies occupy two polar extremes in the organization of economic activity. The primary differences lie in the division of labor or factors of production and the mechanisms that determine prices. The activity in a market economy is unplanned; it is not organized by any central authority but is determined by the supply and demand of goods and services. The United States, England, and Japan are all examples of market economies, as are most developed, democratic nations. Alternatively, a command economy is organized by government officials who also own and direct the factors of production. China, North Korea, and the former Soviet Union are all examples of command economies. 

Market Economy - The "Free Enterprise System"

The two fundamental aspects of market economies are:

1. Private ownership of the means of production

2. Voluntary exchanges / contracts

The most common title associated with a market economy is capitalism. Individuals and businesses own the resources and are free to exchange and contract with each other without decree from government authority. The collective term for these uncoordinated exchanges is the "market."

Prices arise naturally in a market economy based on supply and demand. Consumer preferences and resource scarcity determine which goods are produced and in what quantity; the prices in a market economy act as signals to producers and consumers who use these price signals to help make decisions. Governments play a minor role in the direction of economic activity.

Command Economy - Central Direction

Under a command economy, governments own all of the factors of production such as land, capital, and resources, and government officials determine when, where and how much is produced at any one time. This is also sometimes referred to as a "planned economy." The most famous contemporary example of a command economy was that of the former Soviet Union, which operated under a communist system.

Since decision-making is centralized in a command economy, the government controls all of the supply and sets all of the demand. Prices cannot arise naturally like in a market economy, so prices in the economy must be set by government officials.

In a command economy, macroeconomic and political considerations determine resource allocation, whereas, in a market economy, the profits and losses of individuals and firms determine resource allocation.

Major Criticisms of Each System

Karl Marx, a German philosopher, argued that a market economy was inherently unequal and unjust because power would be concentrated in the hands of the owners of capital. Marx is credited with coining the term capitalism.

John Maynard Keynes, an English economist, believed that pure market economies were unable to effectively respond to major recessions and instead advocated for major government intervention to regulate business cycles.

Ludwig von Mises, an Austrian economist, argued that command economies were untenable and doomed to failure because no rational prices could emerge without competing, private ownership of the means of production. This would lead to necessarily massive shortages and surpluses.

Milton Friedman, an American economist, noted that command economies must limit individual freedom to operate. He also believed that economic decisions in a command economy would be made based on the political self-interest of government officials and not promote economic growth.

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