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Comparison between Command System and Market System - is there a middle way?

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´╗┐Introduction In the assignment, I had asked to think, is it two types of economic systems will converge into one? That are market economies and command economies. Analyze this question with reference to two or more economies involved in the changes. Economics is the study of how society allocates scarce resources and goods, it also concern with production and consumption. There are two types of economy that are command economy and market economy. Command economy is a system where the government, rather than the free market, determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale. Market economy is an economy which is decisions regarding investment, production and distribution are based on supply and demand. Comparison between Command System and Market System Command Economy Market Economy Resource Ownership No private ownership Privately Owned and individuals have freedom of choice to seek wealth Resource Allocation Economic decisions made by governments, based on social interest. Producers produce what the people desire-consumer sovereignty. Profit Motive Profit motive provides no stimulus within the production process as all enterprises are socially owned. Producers aim to maximize profits and minimize cost of production. Dominant of Economic Force Government controls the prices Price mechanism Advantages and Disadvantages of Command Economy Advantages The focus of a command economy is usually on the benefits of the country as a whole and the citizens therein. ...read more.


This will lead to firms using latest technology to produce at lower costs. Disadvantages By using the market economy system, it will facing the problems of unemployment. For example, businesses in the market economy will only employ those factors of production which will be profitable and thus we may find a lot of unemployment as more machines and less labour will be used to cut cost. Beside that, some time the free market can fail to provide certain goods and services. For example, there may be certain goods which might not be provided for by the market economy. Those which people might want to use but don?t want to pay may not be available because the firms may not find it profitable to produce. Other than that, by using market economy system, consumption of harmful goods may be encouraged. For example, free market economy might find it profitable to provide goods which are in demand and ignore the fact that they might be harmful for the society. Lastly, there will also have the problems of ignore social cost. For example, in the desire to maximize profits, businesses might not consider the social effects of their actions, it will cause the poor to unable to enjoy the good and services. According to my research, command economy and market economy can be converges into one. ...read more.


This curve helps in determining what quantity of a nonessential good or a service. A demand curve is a graph curve that normally slopes downward towards the right of the chart showing quantity of good or service demanded at different price levels. Diagram of Production Possibility curve A common PPF: increasing opportunity cost A straight line PPF: constant opportunity cost An inverted PPF: decreasing opportunity cost Diagram of Demand curve In the diagram above the original price of the good was at P1 and the quantity demanded was at Q1. An increase in price to a level of P2 has caused a contraction of demand to a level. Is it suitable that our country run mixed economic system? According to my research, Malaysia is running mixed economic system. In my opinion, Malaysia should use mixed economic system. It is because it contain a lot of benefit to our country. For example people can make their own decisions, the government has limited control which is good for structure, and it provides freedoms such as: Enterprise Ownership, Social Welfare, Profit Earnings, Political Freedom. In Malaysia, all national resources are utilized under mixed economy, it will active government support and direction. That is why so far Malaysia economics do not have much problems. Conclusion In the conclusion, the degree of government interference in market economies and the increased economic freedom in command economies can be converge into one. It gives a lot of benefit to the country. ...read more.

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