The Differences between Command Economies and Free Market Economies

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 or no say in production. It is possible to

illustrate this as an economical voting system in which each pound is

worth one vote. Therefore, those who have the most money, have the

most votes. This means that for businesses, what to produce is

determined by the profitability of a product and when demand

increaces, so to can the ...