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Characteristics of a Free Market and Command Economy

Characteristics Free Market Economy

(Capitalism)

Command Economy

(Communism)

Security/Choice Individual must make choices because resources are limited Central Authority makes choices because  resources are limited
Trade-Offs Individuals make trade-offs because choices must be made between alternative uses of resources Central Authority makes trade-offs, choices made at government level not by individual
Supply and Demand Supply and demand determines price; price determines who can purchase Government determines price; price determines who can purchase
Private ownership Private individuals own resources Government owns resources
Consumer Sovereignty Consumer choice determines what is produced Government decides what is produced
Competition Competition and price determine how goods and services are produced Government determines production methods and practices
Incentives Profit determines economic behavior Government controls incentives and determines their use
Markets Buyers and sellers exchange goods and services in free markets Buyers and sellers exchange goods and services as determined by government in controlled markets
 
This page was updated on:  04/10/02