What is the difference between the market economy and the economy of command?
The main difference between the market economy and the economy of command is that the market economy is generally without government control, while the command is planned by virtually government forces at every stage. In the market economy, the levels of production and prices of goods and services are determined by the manufacturers themselves on the basis of demand for these goods and services. On the other hand, elements such as production levels, prices and even wages in the command economy, also known as the planned economy, are determined by government guards. Most economies in the world actually have the characteristics of both types and are known as a mixed economy.
There are two extremes that can determine the way the economy develops. In a purely free market economy, the government of this nation should not say anything about any aspect of the economy. The second extreme is the planned economy, which practically controls the government without exception. Almost all differences in the market economy and the economy of command are based on this main divergence in philosophy. The laws of supply and demand will be managed to drive, toOlik goods are produced and what the prices of these goods will be. Competition between different companies helps to ensure that there are no surplus or shortcomings, as these companies will be financially motivated to maximize the impact of their production.
On the other hand, the command economy is dictated by the desires of the government. The government will decide which goods are produced and who will have a chance to produce them. Companies that are selected for manufacturing obligations must usually share their profits with the government, which also decides how the goods will be assigned to each geographical region and what prices will be.
It is rare either for the market economy or for the existence of command in its purest form. China has long been considered the economy of command, but in recent years has taken steps to support business on behalf of its citizens. In addition, there are many market economies that include some kind of government intervention. For example, a market in marketThe economy could adopt programs that help the poor or make adaptations of economic mechanisms such as interest rates to encourage stagnant growth. For these reasons, mixed economies are the predominant economic model in the world.