Free Economy Vs Command Economy Essay

889 Words 4 Pages
In any type of economy, it is necessary to have some means for deciding what goods to produce in what quantity, how to distribute those goods, and who gets to consume the goods. The three most important things in any economy are production, distribution, and price. The two most common types of economies in the world are free Economy and Command Economy. Free market is a market economy based on supply and demand with little or no government control. Individuals make economic decisions in a free market, they don’t have the government making chooses for them. In a completely free market, buyers and sellers are allowed to transact freely based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation. People are free to own their own companies, without fear that the government will interfere. Command economy is a system where the government, rather than the free market, determines what goods should be produced, how much should be produced and the …show more content…
Equilibrium is the point at which demand and quantity supplied are equal. In a free market, consumers have a say in the price of things .Business will lower the price to sell out products, if they’re not in demand. If a product is in demand, businesses will raise the price, because they know consumers are willing to pay that high. In a command economy prices are fixed by the central authority, there is no equilibrium. However there are price ceiling and price floors, which is like the complete opposite of equilibrium. Price ceiling is when the government places a limit on how high a producer may charge for his product. Price floor is when a price is leveled above the equilibrium prices. The government does this to have control over the company’s but what they don’t realize is this tight hold is only sending the economy into poverty and depression

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