The free market is employed in numerous countries across the globe, including the United States. In other words, prices are mostly established by the market, and the government has minimal influence.
On the other hand, a command economy may be found in certain countries. Put another way, the government sets prices rather than the free market. Additionally, the government dictates what and how much should be produced.
Consider a few real-world instances. A producer plans to make a toy in a country with a free market. It’s Christmas time.
Therefore the maker is releasing a limited number at a premium price. The item is in great demand, and customers are eager to spend extra to get their hands on it.
Demand is still strong after the holidays, so the manufacturer raises production quickly. Then, as more individuals own the toy, it becomes less sought after. As a result of the decline in demand, the manufacturer chose to reduce output and lower the price.
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Under a command economy, there would be no control over what is produced, how much will be produced, or how much it costs. The government would have the last say on all of this.
In this form of economy, there is no rivalry. In a command economy, the government is also overseeing investments and earnings.
Communism has a characteristic known as a “command economy.” The following countries have a market economy:
- North Korea