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Command economic systems
Relies on planners, directed by government, to decide what and how to produce. Characterised by low living standards and inflexibilities.
One in which the government is liberalising some sectors so that production and marketing decisions are made by individual organisations
and people on the basis of supply and demand conditions, rather than by state-employed planners.
Has both public and private sectors. E.g. Police in the public sector and shops in the private sector.
Free Market Economy
Activity is directed by entrepreneurs and private organisations rather than the state.
Consumer sovereignty: where consumers ultimately control the allocation of resources by choosing what to buy.
Opportunity Cost: the best alternative forgone when a particular choice is made.
Scarcity: individual needs and wants always exceed the availability of resources to provide them. Choices must be made.
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Market Forces: When the conditions of supple and/or demand change in a market, this is likely to lead to price changes. These, in
turn, influence the decisions of businesses and consumers.…read more