What are the main characteristics of a free market economy and a centrally planned economy?

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(a)        What are the main characteristics of a free market economy and a centrally planned economy?


Market economy is about the exchanges between individuals are voluntary and that anyone engaging in such exchanges benefits from them, that means no government interrupts, all the decisions are made by individual firms.

For free market economy, we can explain it in 3 expects.

First, because households are the ‘owners’ of productive resources, firms have to pay them for their resources in the resource market, they can produce everything they want, the type and amount of products are determined by every individual firms, but they should produce the goods and service that other companies or household want, and can make the maximum profits, more profits, more motive for the producers.

  Second, in the resource market, households provide firms with the factors of production (land, labour and capital etc.) they demand in order to produce their output. But, these inputs are not free, so every firm face costs in acquiring them, so when they choose the products they produce, they must consider the cost of the products and production. Every producer is willing to reduce the cost and make the maximum profit. But, this will cause a problem in such situation, there will be some black-hearted producers that use the bad material in the production, like the dirty oil event in China, that is because the oil producer overdoes reducing the costs, and the mangers of restaurants are also willing to make less cost of raw materials of foods, these oil producers have their ‘market’, so they decide to abandon the quality.

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  Third, in free market economy, the producers should care about the different consumer levels, that means levels of consumption are based on social standing, or gender, age etc. that is because if every scope of consumers has the same amount of allocation of resources for the production, some consumers will have less motivation to buy the products. Inequity happens.

          For the centrally planned economy, (it is also called command economy), all the resources (land, labour and capital) in the market are allocated by government, and it makes all the productive decisions, so, the centrally ...

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This essay has a fine structure, but the quality of writing is poor. Words are often made up, for example "internation" or used completely in the wrong context "we can explain it in 3 expects". It's a shame, as there is okay analysis beyond these mistakes, but the numerous mistakes just detract from the content. This shows how crucial a strong, flowing, and clinical style is.

The analysis in this essay is okay, but there is a distinct lack of technical terms. The first paragraph reeks poor quality. For example "that means no government interrupts" should be phrased as "government intervention is unlikely or absent completely". The explanation of a market is poor. If I were doing this essay I would be trying to explain the forces of demand and supply, and the market mechanism coming to an equilibrium price and quantity. This then results in incentives in various markets, causing entrepreneurship, etc. I say this essay has potential, as they are able to identify the key characteristics of each economy, it just isn't written in a sophisticated manner. There consequence of inflation is somewhat wrong. Inflation would be a consequence as command economies control the prices, whereas a market mechanism dictates prices in a free market economy. So, it is likely that demand will exceed supply and prices will rise.

This essay engages at an okay level with the task, explaining the main characteristics of the two economies well. It's a shame to see the second part of the question answered so shortly, as there is plenty of scope for discussion. I liked how they made a clear distinction between negative and positive effects, but there needed to be some further evaluation discussing which effects are more favourable and to what extent is each effect is significant.