1. List the main differences between a free-market system, a command economy, and a mixed economy.

Answer 1

1. In a free-market system, decisions regarding production, consumption, and resource allocation are primarily driven by individuals and businesses based on supply and demand forces. In a command economy, these decisions are made by the government or a central authority. In a mixed economy, these decisions are made by a combination of individuals, businesses, and the government.

2. In a free-market system, there is limited government intervention in the economy, allowing for competition, innovation, and individual initiative to flourish. In a command economy, the government has complete control over production, distribution, and resource allocation, often leading to inefficiencies, lack of innovation, and limited individual freedom. In a mixed economy, there is a balance between government intervention and market forces.

3. In a free-market system, prices are determined by supply and demand, leading to efficient allocation of resources. In a command economy, prices are often set by the government, which can result in shortages or surpluses. In a mixed economy, prices are influenced by both market forces and government policies.

4. In a free-market system, property rights are respected and individuals have the freedom to own and exchange property. In a command economy, the government often owns and controls the means of production, limiting individual property rights. In a mixed economy, property rights are protected, but there may be some government regulations and interventions in certain sectors.

5. In a free-market system, competition drives efficiency and innovation, leading to economic growth and prosperity. In a command economy, lack of competition can result in inefficiencies and stagnation. In a mixed economy, there is a balance between competition and government intervention to ensure both efficiency and social welfare.