| 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 |
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