Wages in this economy reflects the contribution of the members. Here, businesses have the liberty to manage and use productive resources as required, intending to earn profit by creating products or delivering services which are valued by people. In a market economy, the factor markets have a crucial role to play in the allocation of resources, such as land, labour, capital etc. In this economic system, the decisions concerning production, distribution and investment are ascertained by free competition between businesses. People are responsible for their economic security.Ī market economy is an open economic setting characterised by the free flow of commodities between buyers and sellers, based on its demand and supply in the market. People cannot freely choose their work or change jobs. People can freely choose their work and use their resources and capabilities. Market Economy is one in which the demand and supply forces decides the production of goods and services and their prices.Ĭommand economy refers to an economic system, where all the economic decisions are taken by the government and industries are publicly owned. Content: Market Economy Vs Command Economy The basic difference between these two lies in the way prices are determined, division of labour, government interference, distribution of income, etc. production, distribution, consumption and exchange of goods and services to meet the needs of people.īoth market economy and command economy are two opposite ends of the economic setting. It is that system operating in the country which organizes, coordinates and balances the economic activities, i.e. An economy is nothing but a framework within which the economic activities are undertaken.
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