One of the things that can be observed in the evolution of the society through the years, is that it cannot be denied that its behavior has become more consumeristic than ever. Nowadays, people consume many different kinds of products, regardless of whether it is a necessity or just plain leisure. In these situations, the economic activities of a country can be classified into two categories, namely the command economy system or market economy system. In the command or “planned economy” system, the government holds control of all the factors used in production, and in answering the four economic questions what, how, for whom and when to utilize these resources are central to the hands of the government. This is why the command system not only considers the economic, but also the political perspective in making decisions.
The market or “free enterprise” system, on the other hand, has two distinguishable components which includes voluntary contracts, and the private ownership of all resources utilized in production. Owners of private firms have the sole power on providing answer to the aforementioned economic questions, which means that the government has a limited power over these entities. One of the most evident disadvantage of this type of system is that since there is no fair access to the resources market, or the ability to buy means for production. This consequently affects the product market, since the ones with more access to resources are able to produce and sell more. This is because the existence of these firms is based on the personal interests, motives, and capabilities of the owners, or what is referred to by Adam Smith as the “invisible hand”. Since this can be considered as “free market”, producers have the liberty to choose the products that they want to sell in the market, which makes the system rely on the demand and supply factors in determining the prices of their produce (Grigg, n.p). This type of economic system is where producers and consumers can coexist as the structures of the economy. Another distinguishable trait of the market economy is the presence of competition within producers. Because of its nature, private entities can enter and leave the market scene freely, promoting competition between businesses. Producers have no choice but to produce products with optimum quality at low prices in order to entice more consumers to buy their products.
Works Cited
Grigg, Cindy. "Characteristics of a Market Economy ." Hickman Mills. N.p., n.d. Web. 31 Jan. 2017.
