The Differences between Command Economies and Free Market Economies

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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
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This type of economy works in the private sector of business ie. Individual firms.

A command economy is an entirely different system in which a central government decides how to answer the three central economic questions. 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. For one example, in the free market economy, there have often been problems with failure to produce medicines that are seen bt medical companies to be unprofitable but that are ncessary to public health. At this point, it would be wise to adopt a more command economy in which it can be assessed which medicines are needed and
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