Answer to Question #263927 in Economics for Nalyn

Question

Contrast how a market system and a command economy address the problem of resource

allocation.

Answer 1

The command economy is the opposite of the market economy. It is based on state ownership of all material resources. All decisions on major economic problems are made by the authorities.

For each enterprise, the main points are provided by the production plan.

The market system is the mechanism by which these individual decisions are consistent and even coordinated. The production of goods and services, on the one hand, and the supply of resources, on the other hand, means that there are many buyers and sellers of goods and services, as well as resources, that is, there is always the freedom of choice. As a result, all the main problems in such a system are solved independently, that is, without the participation of the state.