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Outline the main features of a market economy and compare it to a Command economy.

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Introduction

a) Outline the main features of a market economy and compare it to a Command economy. (10) For an economic society to survive there must be an economic system that will allow people to produce goods and services for the consumer. There are three main economic systems in the world today such as the free-market economies; the command economies; and the mixed economies. There are no pure command economies or pure free-market economies in the world today. There are only mixed economies this is because no economy is purely run by the state and no economy has no state intervention. All of these economies face the same basic economic problems and how they answer these problems determines which economy is in use in a society. Theses problems are three questions: what will be produced?; how will they be produced; and who will get what is produced? A free-market economy tries to solve the basic economic problem by allowing free play in the market. This means that the state will have very little interference if any with any economic activity that will occur and that anyone can take part in this economic activity. This system of free play is often described as laissez-faire. ...read more.

Middle

In a command economy the state may make that factory make those toxic fumes safe in a costly process that the factory wouldn't do if it weren't law due to the large costs. Safety again can be another weakness for the public in a free-market economy, when desirable demerit goods, such as alcohol and cigarettes, can be more attractive due to their low cost. These goods can be harmful to consumer whereas merit goods such as education and health services, will help the consumer and have a smaller demand therefore they can be too expensive for many people to afford. Whereas in a command economy the state will tax demerit goods making them less attractive and subsides merit goods making them more affordable or in some cases free. Also in a free-market economy there are no laws on the selling of extremely harmful drugs or other goods such as heroin. These however in a command economy are often illegal and can only be purchased illegally with extreme difficulty on the black market. Also in a free-market economy it can be hard to make consumers pay for services such as defence that they don't directly use and therefore they are not produced. ...read more.

Conclusion

c) What kind of system does the UK have today? Do you think the balance is right? (5) The UK has a mixed economic system. This means that it has some features of a free-market economy and some features of a command economy. One of the features that the UK has that is of a free-market nature is the feature of free enterprise. This means that the British government allows any workers in the UK to work for anyone they want and people are allowed to set up their own companies and produce whatever they want. Another feature of the free-market economy that is present in the UK is that everyone is given the right to private property and within or using that property earn an income. In my opinion the balance isn't right. I believe that the UK should lean more to the command side of its mixed economy. I believe more money should be spent by the state on subsidising merit goods, such as education, health and police to improve them. To do the government should tax more on demerit goods such as alcohol and cigarettes, but especially on goods that damage the environment such as petrol. I also believe that to allow for more money to subsidise merit goods the so-called 'rich' in the UK should be taxed more than they already are. ...read more.

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