Market Economy And Command Economy
INTRODUCTION
This report focuses on two systems of economy, that is Market economy and Command economy. Basically there are four types of economy:
Traditional Economy:
As the word says, Traditional economy is an economic system in which traditions, customs and beliefs of the economy guides the production of goods and services.
Command Economy
Command economy is a system in which government plays a major role in taking the production decision for goods and services in the economy.
Market Economy
Under this system, goods and services are produced according to the market forces of demand and supply.
Mixed Economy
Mixed economy is simply a combination of market economy and command economy wherein production takes place by determining demand and supply forces and government too interferes in economic activities for the betterment of the society.
MARKET ECONOMY
Market economy refers to an economic structure wherein investment, production and distribution decisions are based on market forces, that is demand and supply. Businesses and individuals are free to make their own decisions as they buy and sell in the market place. The main feature of the market economy is freedom to negotiate the cost of the commodities. There are four main participants in a market based economy, namely consumers, producers, owners of private property and government. However there is little to no government involvement when determining prices.
Price is determined by the changes in demand and supply. A Producer will start producing more units of a product if there is an increase in demand for the product in the market. In market economy, the main motive of a producer is profit maximization and for a consumer it is to maximize their total satisfaction. However, no single consumer can affect the market price. Market economy operates same as a perfect competition market.
In case of perfect competition, where there are large number of buyers and sellers, industry is the price maker and firm is
This report focuses on two systems of economy, that is Market economy and Command economy. Basically there are four types of economy:
Traditional Economy:
As the word says, Traditional economy is an economic system in which traditions, customs and beliefs of the economy guides the production of goods and services.
Command Economy
Command economy is a system in which government plays a major role in taking the production decision for goods and services in the economy.
Market Economy
Under this system, goods and services are produced according to the market forces of demand and supply.
Mixed Economy
Mixed economy is simply a combination of market economy and command economy wherein production takes place by determining demand and supply forces and government too interferes in economic activities for the betterment of the society.
MARKET ECONOMY
Market economy refers to an economic structure wherein investment, production and distribution decisions are based on market forces, that is demand and supply. Businesses and individuals are free to make their own decisions as they buy and sell in the market place. The main feature of the market economy is freedom to negotiate the cost of the commodities. There are four main participants in a market based economy, namely consumers, producers, owners of private property and government. However there is little to no government involvement when determining prices.
Price is determined by the changes in demand and supply. A Producer will start producing more units of a product if there is an increase in demand for the product in the market. In market economy, the main motive of a producer is profit maximization and for a consumer it is to maximize their total satisfaction. However, no single consumer can affect the market price. Market economy operates same as a perfect competition market.
In case of perfect competition, where there are large number of buyers and sellers, industry is the price maker and firm is
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