Sample Essay on Benefits of market economy and command economy

Market economy and command economy

Benefits of market economy and command economy

To an ordinary citizen, the benefits associated with market economy includes, but not limited to the fact that the market conditions gives the producers and avenue of producing what the market requires. At the same time, the free market conditions encourages competition, which in turn leads top efficiency in the market as well as reducing costs while increasing the production capabilities. With a free market conditions, the producers and supplier work hard to deliver and there is much innovation so as to deliver unique products in the market. The buyer in the free market is able to buy whatever they want since there is variety in the market.

A command economy on the other hand, in the views of an ordinary person has the advantage in that provision of quality goods since there are regulatory bodies controlling how business takes place, at the same time, it helps the government to know and address the needs of the people, therefore making it possible to be able to respond to risks and disasters faster. The centrally controlled economy is able to lead to efficiency while at the same time taking care of the disadvantaged areas and communities.

Problems with market economy and command economy

Market economy may lead to various problems, including instability in the market, thus leading to unemployment. At the same time, price being a central focus may give false signals to externalities, thus leading to increased pollution and environmental degradation. In a market with monopolistic competition, the tendency of restricting output may arise, thus raising the prices of goods. It may lead to a greater disparity between the poor and the rich as price determines the market supply.

Command economy has problems which include coordination problems since decisions are made centrally. At the same time, controlled economy leads to global market conflict and may not stimulate the required innovation. There is also the issue of misplaced incentives whereby the government decides on the amount to be produced instead of the market forces.