Mixed Economy Vs. Command Economy Essay

752 words - 3 pages

An economic system defines how the various entities in an economy interact. People have defined an economic system variously to include government policies, which is very important especially in modern times. Ancient systems were pretty simple. Trade was done using systems like barter trade which was very straight forward. People only exchanged what they had for what they needed, or wanted. However, in modern monetary economies, the setting is quite intricate. Huge established companies have a lot of influence in the way business is done. Treaties and agreements are made every day, and governments have made numerous laws to define trade, thus warranting the need for a more comprehensive definition of what an economic system is. An economic system can now be described as an organized manner in which a particular government chooses to allocate goods and services in the country. Modern economic systems are about more than just trade. They define the values of a society, or a country, as well as the political structure of that society.
Two ways an economy can be organized are as a mixed economy or a command economy. A mixed economy is an economic system that incorporates the characteristics of several different economic systems. This usually means an economy that contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and command economy characteristics. There is not one single definition for a mixed economy. However, a command economy, or centrally planned economy, is where the government controls the economy and owns both land and capital.
There are three basic questions in economics. One is, which goods are to be produced? The other one is: how are the goods going to be produced. The third question is: who is going to consume those goods and services that have been produced. Effectively, the structure of an economic system seeks to answer these questions. The system sets the rules of play for all participants in an economy, and defines how they are going to interact with each other.
A mixed economy combines elements of free-market and command economies. Both market forces and government decisions determine which goods and services are produced and how they are distributed. These moves are made for a variety of...

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