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Outline the differences between Command Economies and Free Market Economies

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Sarah Fearns Outline the differences between Command Economies and Free Market Economies The prime difference between command economies and free market economies is the method used to answer the three central questions of what, for whom, and how? Each of these questions relates to production. In a free market economy, the answers to these questions are decided by the consumer and overseen by a government that practices a laissez-faire economic policy. Production is decided on a supply and demand basis- resulting in a capitalist society. This happens due to the dispersion of wealth throughout an economy, the richest dictating which products should be produced due to their own demands, and the poorest having little or no say in production. ...read more.


The government would decide what is to be produced, how it is to be priced etc. resulting in a far more communist state. This obviously gives the government a far more autocratic role in their economic policy in contrast to the free market economy. Products are designed with the incentive to meet consumer needs rather than to meet the wants of the richest. This way is far more practical towards ensureing the production of necessary goods. This type of economy works under the public sector- everything is funded and controlled by the central government. Discuss Whether there are Lessons to be Learned Between the Two Systems No economic system will ever work flawlessly so it is undoubtable that these two systems would be able to adapt to become more practical. ...read more.


For example, in a command market, this may occasionaly require government interference in people's personal lives. You would need government permission to move to a new area so that food, houseing etc. could be accounted for. Genarally, it is considered wise to use elements of both systems in an effective 'mixed' economy. This would include a public and private sector of busineess- much like the system used in the UK. Many prducts and services such as food, clothing and media are catered for by the private sector. In this way, supply and demand dictates what is produced in what quantities. Other important aspects of society are catered for by the public sector. Healthcare and education for example, is something that everyone has an equal right to and, therefore, should not be dictated by wealth. ...read more.

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