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TEXT

Market and Command Economics

 

Economics is a social science studying economy. Like the natural sciences and other social sciences, economics attempts to find laws and principals. F.conomics analyzes what, how, and for whom the society produces goods and services. The central economic problem is to solve the conflict between people's unlimited demands and the society's ability to produce goods and services.

Economics as a science consists of two disciplines that of macroeconomics and microeconomics.

Macroeconomics is the branch of economics that studies the economy as a whole. In particular, it studies the overall value of output, of unemployment and inflation.

Microeconomics is the branch of economics that studies markets, individual producers, consumers. Microeconomics also studies how government activities such as regulations and taxes affect individual markets. Besides microeconomics tries to understand what factors affect the prices, wages and earnings.

In the Western industrial countries markets are to allocate resources. The market is the economic process by which production and consumption are coordinated through prices.

In a command economy, a central planning office makes decisions on what, how, and for whom to produce. Economy cannot rely entirely on government decisions, but still there was extensive planning in many former socialist countries.

A free market economy has no government interference. The resources are distributed entirely through markets.

Modern economies in the West are mixed and rely mainly on the market fluctuations but the government takes part in the production planning and influences the development of some industries. The optimal level of the government interference remains the problem which is of the greatest interest to the economists.

The degree of government restrictions differs greatly between the countries that have command economies and the countries that have free market economies. In the former, all resources are distributed by the central government planning office. In the latter, there is not any government regulation of the consumption, production, and exchange of goods. Between the two main types there is the mixed economy where both the market and the government influence the economic development of the country.

 


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