Market vs. Command Economy Essay
Market vs. Command Economy What is the main purpose of the economic system? The main purpose of the economic system is method used to produce and distribute goods and service. The three economic questions are: “What goods should be produced?” “How should these goods and services be produced” And “Who consumes these goods and services?” The characteristic of a market economics is that self-interest is the motivating force in the free market, self regulating market. The interaction of buyers and sellers motivated by self-interest and regulated by competition, all happen without a central plan. In a market economy, economic decisions are made by individuals and are based on exchange or trade. However, characteristics of a command economic is that it’s a central planned economy with all (most) economic and political power rest in the hand of the government. Command economic usually involve 2 type of government – socialism and communism. In a command economy, the central government makes all decision about the production and consumption of goods and services. First and Foremost, market exits because no one of us can make everything we need. A market is an arrangement that allows buyers and sellers to exchange goods and services. Specialization is the concentration of the productive efforts of individuals or households and firms on a limited number of activities. Self-interest is the motivating force in the free market, Self Regulating Market. Producers in a free market struggle for the dollars of consumers. This is known as competition, and is the regulating force of the free market. For example, McDonalds will do anything for our money! They attract all buyers-young, old, fit, not fit, etc... The interaction of buyers and sellers, motivated by self-interest and regulated by competition, all happens without a central plan. This phenomenon is called “the invisible hand of the marketplace.” In economics a '"Factor market'" refers to markets where services of the