To determine which statements best reflect a command economy or a market economy, we need to understand the basic characteristics of each type of economy.
In a command economy:
- The government has control over economic decision-making.
- The government determines what goods and services should be produced, in what quantities, and how they should be distributed.
- Prices are often set by the government rather than by supply and demand.
In a market economy:
- Economic decision-making is primarily driven by the interactions of private individuals and businesses.
- Business owners have the freedom to make decisions about how to run their companies, such as what to produce and how much to produce.
- Prices are determined by the forces of supply and demand in the market.
Now, let's match each statement to the economy it best reflects:
1. Business owners make decisions about how to run their companies.
This statement reflects a market economy since it highlights the freedom of business owners to make decisions in a market-driven economy.
2. The government decides how much of an item should be produced.
This statement reflects a command economy because it indicates that the government has the authority to determine the quantity of production.
3. Legal policies are put into place that control prices.
This statement reflects a command economy as it implies that the government establishes regulations and controls over prices.
4. Prices are set by supply and demand.
This statement reflects a market economy since it emphasizes that prices are determined by the interaction of supply and demand forces in the marketplace.
So, to summarize:
- Business owners making decisions indicates a market economy.
- The government deciding production quantities indicates a command economy.
- Legal policies controlling prices indicate a command economy.
- Prices determined by supply and demand indicate a market economy.