differentiate between planned economy and free market economy
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Answer:
Explanation:
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To start out with, a command economy is planned, where the government decides the main economic decisions. Next, a market economy is when individuals are free to make their own decisions as they buy and sell products. So between both economies, the command economy is planned and the market economy is free.
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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.
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