Question

why a Market System is more efficient than a Command System at utilizing a nation's resources.

In a market system, who determines what product gets made? Why / How? What is the term that describes this concept? Cite an example of this

Answer 1

The command economy is characterized with a public ownership of nearly all property resources and decisions in an economy are made by an approach of central planning. On the other hand the market economy system permits for the private ownership of resources and coordinates among the activities in an economy through market prices. The market economy includes the freedom of enterprise, private property, freedom of choice, competition, self-interest, system of markets, money/exchange medium, efficiency, specialization, limited but active government. The intervention of government in a market economy can cause improvements in the presence of externalities. The free market economies are very competitive thus results to efficiency; and also leads to innovations due to competition. It often results in the higher economic growth compared to command economy

In economics the three main fundamental economic problems that need to be addressed by all countries and societies are the “What,” “How,” and “For whom”. The “What” question is on what the nation will produce? What combination of products would be best for a country? How should this combination of products should be produced is the “How” economic question. The “For Whom” economic concern is for whom these products will be produced. Who will receive them? In command economy, the government makes a decision on the answers to the three fundamental economic problems i.e. “What,” “How,” and “For whom”. In the market economy, buyers make a decision on the answers to the three fundamental questions. The United States, Japan and Germany are all example of the market system