What is the difference between a command and a market economy?


Quick Answer

The government has more authority in a command economy, while private citizens and companies have more influence in a market economy, according to Infoplease from Pearson Education. The government directs the types and levels of production in a command market. Private producers choose the amount of goods to supply the market in a market economy.

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What is the difference between a command and a market economy?
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Full Answer

The United States has a market economy. The U.S. government intervenes moderately to set price floors and price ceilings. Otherwise, prices of goods and services are driven by the level of consumer demand for them, notes Infoplease. If consumers demand more than suppliers can produce, prices are typically high. If consumers do not want what suppliers produce, prices are typically low.

In a command economy, all aspects of the production and usage levels are planned by the government. Government officials evaluate the resource needs of the marketplace and forecast necessary production levels. Then, producers are directed to manufacture a prescribed quantity of goods during a period of time. Socialism and communism are primary forms of government that rely on command economies, according to Infoplease. The goal of a command economy is to ensure equal rationing of goods. The primary goal of a market economy is to promote innovation and ambition in spite of the potential for income inequality.

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