Resource ownership and the level of control determine the ty

Resource ownership and the level of control determine the type of market system used in one’s culture or country. The three basic types of market systems are free market, command market, and mixed market.

Free market—refers to resources and industries owned completely by private individuals. This economy type is driven by the goal of profit determined by consumer demand. In a free market, the government maintains a distant role, only ensuring the market remains stable. The market system has many benefits, but also some drawbacks. These include possible shortages and surpluses due to market fluctuations, income discrepancies that can lead to a society of very rich and very poor, and distribution of public services.

Command market—works through central planning by a government that owns all the resources. Authorities own all resources and establish all facets of the economy, including what and how much is produced, financial compensation to workers, prices of products and who can receive them. The benefits of a true command market system include a similar quality of life—though it tends to be the lowest, not the highest, standard—for all citizens, with little homelessness and no inflation due to government price controls. The command system has a number of drawbacks including limited product selection, needs determined by the government that are truly compatible with what the society requires or wants and the restriction of personal freedoms. When workers do not own the resources, and receive the same amount of compensation regardless of what they do, there is no incentive to improve existing products or make innovations.

Mixed market—most countries in the world employ a mix of free-market and command-market systems. In an ideal mixed market, both the businesses and the government work together to meet the demand for products in the safest and most efficient manner possible. Mixed market systems are favored by a wide range of societies because they can balance diverse economic and political ideals between groups with vastly different views.

Question: Briefly summarize why the U.S. considered a mixed economy? From a consumer’s perspective, how might product and brand choices vary between a command economy and a free-market economy?

Solution

Ans

It is quite simple. Here market system functions side by side with command systems. In other words Govt intervenes in market economy when it is necessary to do so.

In market system product and brand choices are according to wishes of consumer but in command system it reflects wishes of a planning authority. They produce what they consider is most beneficial for economy. But as happened in ussr such systems fail ultimately because they do not reflect real choices of people