• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Outline the main features of a market economy and compare them to a command economy.

Extracts from this document...

Introduction

´╗┐Economics. 1. Outline the main features of a market economy and compare them to a command economy. For any economic society to survive it must first choose a suitable economic system best suited to the country and will allow the countries people to produce goods and services for the consumer. There are 3 main economic systems that exist in the world today such as a market economy, command economy and mixed economy. No one economy in this world today is either wholly a market economy or command economy. There are only mixed economies, this is because no economy is fully run by the state or has no state intervention whatsoever. All economies though will face the same questions but the way they answer these questions is how these economies differ. These problems are in the form of three different questions ? what will be produced? How will they be produced? Who gets what is produced? A market economy tries to solve these questions with only enough government regulations to protect property rights against theft and aggression. The way it does this is be allowing free play in the market meaning that anyone can take part in the economic activity. This free play system is often referred to as laissez-faire which translates to ?let it be?, meaning that if it isn?t wrong, don?t change it. ...read more.

Middle

surgery/medication/vaccination and could not afford it you would not be given the same service of healthcare as there is no tax-payer funded state health service. If we think of a market economy in terms of goods it means that things people demand will get produced over things that people actually need. For example, if one company produces an amazing drink which everyone loves but it is in fact extremely bad for your health in the long run; but a second company produces a second drink which tastes really bad but will be beneficial for your health in the long run, people will buy the drink which is bad for you, based purely on the fact that it tastes good. Therefore the first company can charge more for their drink as it is in high demand but the second company will have to put their prices down so as to make their drink seem more attractive. The problem with putting the price of your drink down is that over time it will be harder to make a profit so the company may go bust, but before then the company may decide that if it is to stay afloat it is to make something people will want to buy and what people want to buy is the drink that is bad for you. Thusly the second company will create a drink similar to that of the first company; this creates competition between the companies where each will battle it out with their prices to make the biggest profit. ...read more.

Conclusion

This means that the central planner (in the UK this would be the Prime Minister) does not have the ability to discern how much a good should be produced, this is because one person cannot take control over everything and get it all right. Shortages and surpluses are a common consequence of command economies. 1. Which is the best system? In my opinion I don?t believe that one system is truly better or worse than another. I think that the best system is to have a bit of both, but not 50-50. I think there should be more elements of a free market economy than the command economy. The reason I say this is that with a command economy too many people believe that they can just sit back and real on the state to fund their lives as it is too easy for people to get benefits. However, with a market economy there is an incentive to work as the state doesn?t provide citizens with benefits and people actually have to go out and earn a wage to provide for themselves and their family. Also with a market economy consumers send signals to the producers about what they should be creating and in what quantities, resulting in a much more efficient allocation of goods. Although I think we still need to have some input from the government so as all children can have an education and everyone can have access to some sort of healthcare without having to pay the extortionate amounts that would come with a market economy. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. what is economics

    result, they are quite likely to continue to purchase a product despite a price increase * Over time, however, as consumers find out more about other substitutes, demand for a product is likely to become more price elastic. * Also, where consumption of a product can be delayed (new car,

  2. Communism - A Failed Russian System

    This time period was known as the "Great Purge". Stalin systematically executed anyone who stood in his path. Stalin had millions of people arrested and killed. The government once again changed in its economic status. All private ownership was ended. Industrialization started, and the strength of the Soviet's Military significantly increased.

  1. 'Although corporate pricing decisions are influenced by many different factors, fundamentally prices will reflect ...

    It is known that a seller prefers to have a monopoly than to face competition. In general, we think of monopoly prices as being somewhat higher than competitive prices, and of monopoly profits as being higher than competitive profits (which are in the long run merely equivalent to a normal rate of return).

  2. Economics of Healthcare

    If the government decides to spend money on the services in the NHS, it means that they will not be able to give subsidies to any other important part of our social system such as education or the emergency services.

  1. Outline and critically assess J K Galbraiths argument that it is not the market ...

    Lastly ............ see lecture slides Before we explain what the planning system is we must first say why there was a need for it in the first place. Galbraith thought that the planning system had developed due to the world becoming increasingly technical.

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

    Advantages and Disadvantages of Market Economy Advantages One of the advantages of market economy is the market produces a wide variety of goods and services to meet the consumer's wants. For example, firms will produce what people want because it is more profitable whereas anything which is not demanded will be taken out of production.

  1. What Are The Effects Of Tescos Oligopolistic Market Structure, On Both Consumers And Producers?

    In this diagram when costs rise, from an increase in sales taxes for example, the marginal cost curve MCi moves upward to MCii. The profit maximising oligopolist still equates MC with MR in order to determine the level of output.

  2. Given the degree of government interference in market economies and the increased economic freedom ...

    All modern economies are mixed where the means of production are shared between the private and public sectors. Mixed economy can also be called as dual economy. There are many countries around the world that are either capitalist or socialist, with countries ranging from the United States to Cuba being referred to as mixed economies.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work