A Command Economy - This is when the allocation of resources, along with production methods and amounts, incomes and prices in any investments are dtermined by the government.
A Free Market - It is based on supply and demand with little or no government control. A completely free market is a desired form of market economy where consumers and sellers are allowed to trade freely based on a mutual agreement on price without any authority involvement in the form of taxes, subsidies or regulation.
A Mixed Economy - This is a combination of a Command and Free Economy. It is partly determined by the government allocating and investing in resources and having control over production, but also is influenced by firms and companies trading and agreements between one and another on allocating different resources as well as controlling the production process.
Examples
A Comand Economy - North Korea
Nations such as North Korea and Cuba are examples of countries
where Command Economy still exists in complete form.
For decades North Korea has been one of the world's most secretive
societies. It is one of the few countries still under nominally
communist rule.
Decades of this rigid state-controlled system have led to
stagnation and a leadership craving power and control over their people.
Aid agencies have estimated that up to two million people
have died since the mid-1990s because of acute food shortages caused by
natural disasters and economic mismanagement. The country relies on
foreign aid to feed millions of its people.
So
in a Command Economy, both state-owned and private
enterprises receive instructions and directives from the government
regarding production capacity, volume, modes of production and course of
their actions. North Korea is an extreme example of a command economy
as many see it as more of a dictatorship due to the harsh control of the
leadership and the little concern for welfare of the people.
A Mixed Economy - The United States.
The USA is known to be a mixed economy. This means that citizens can own their own
businesses, but political leaders make policies concerning these. The government controls the mail system. The government controls most of the road networks. The government controls most of the schools. All American airports are government operated but all
American airlines are private. The government tells
manufacturers what to make if something is in need during war time. The government has created a
minimum wage law. The government provides social welfare payments to some citizens. The majority of education costs are government-provided. In recent years, the Federal government has given taxpayers money to failing businesses, in the form of bail outs.
So this means there is a balance between influences from the Government and the companines and firms having the freedom to tade and choose production methods. That the authorities provide services and have control over the public and most important facotrs such as health and education. The key characteristics of the US economy is that it has a free market, there is private property owned, and there is consumer sovereignty
A Free Market Economy - Hong Kong
Hong Kong has been ranked the freest economy in the world. The way Hong Kong has been tagged to be the freest economy in the world is from an
analysis of 50 different economic variables, grouped into 10 categories. These categories are:
- Capital flows and foreign investment;
- Fiscal burden of government;
- Government intervention in the economy;
- Regulation;
and informal,
So the Hong Kong economy is one of a free market. Further key factors for this include a very low level of government involvement in business activities as well as a very low inflation rate.
