Question

What are the differences between command economies and market economies? Which are "better" types of economies? Support your post with concepts from the readings.

Answer 1

Market Economy is the economic system, There is the complete ownership of production and distribution is always a private individual.There is no Government intervention. In theis type of market market control by price mechanism or demand and supply of market.On the other hand, Comand economy means which is controled by the goverment, there is production, factors of production and distribution everything under control of government.Government decisions and policies control the market situations. Both economy have lot of similarities and differences.However major portion of economies in the world working in the mixed economy system , mixed economy system is the combined form of market economy and command economy.The following paragraph discusses the similarities and differences of command and market economy.

If we consider the similarities both system have power of control the market , both economic systems aiming economic growth and both economy can reach economic growth and reduce the unemployment. Both economic system can assure the quality supply of product and services.However both are different in many ways especially in the case of price, authority,equality, efficiency,working and problems and so on.

First,If we consider market economy owned by private individual or private sector, but command economy owned and managed by Government.Second, In Market economy price controled by demand and supply of market or price mechanism But in the case of Command Economy price determined by Government or central planning authority of government. Third one is, Market economys working pattern is profit oriented and they are profit motives so that get more incentives to the employees.but command economys working is not for profit maximisation, aimming social welfare so that there is provide less incentives. Fourth. Market economy create more income and wealth inequalities, however command economy can assure more and almost perfect equality in all most all aspect of the economy and people life.

Fifth difference among both these economy in thecase of market efficiency and problems facing both the econmy. Market economy is more efficient than compared to command economy because there is provide more incentives so employees work efficiently and they are profit motive so they can determined the price and cost on the basis of aiming profit maximisation. so they cut cost and output maximisation and profit maximisation besides market economy concentrate on product differntiation . On the other hand command economy give important to social welafare so that give less incentives this will reduce the effiency and there is limited variety of product this make less market efficiency compare to market economy.

Lastly, both market facing different issues. In the case of market economy which face the inequality,high price, marketfailure,monopoly power and high competition among firms However , In the case of command economy, beurocratic issues,inefficiency limited chices,rules and regulations and surplus and shortages etc.

Although, If we consider both economic system both have pros and cons, market economy is has less cons compared to command economy. But there is social welfare is the big issue market economy didnot assure the welafare. So that Mixed economy means combination of these two economic system is more and far better option.