Free Market Economies V. Planned Economies

Free Market Economies V. Planned Economies

There are two main rationing systems:

·      Planned Economies: ``An economic system in which economic decisions are made by the state or government rather than by the interaction between consumers and businesses. The production of goods and services is undertaken by state-owned enterprises´´.[1]

·      

     Free Market Economies: ``A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation´´.[2]

In my opinion, ``The Free Market Economy´´ is better for people since it handles the Economic Problem by private companies and there is no government intervention. As it is in private hands, each company is free to set their own prices and/or wages. Also, every one is free to decide what products they want to purchase and/or produce since all the resources are privately owned. But not everything is positive since there might be more unemployed people since it will only employ the factors of productions that will benefit them and fewer workers might be needed. This is because nowadays, a lot of factories will have more machines to produce products and people will not be needed which will also cause more pollution. Another reason could be that if there is a very popular product that everyone wants, it will have a high price but as people start not buying it, they will end with a lot of unsold products, which will make them lower the prices and money will be lost. Since everything might be expensive, not everyone will be able to afford it and some people will not be able to look after themselves.

There are also ``Planned Economies´´. In my opinion, these one is not the best for people since the government is who makes the decision to how to produce, the amounts of levels to produce as well as the prices and wages. This economy isn’t present in a lot of countries since only North Korea, Laos and Cuba has it. Some disadvantages are that the product will not be in the market that fast and it will no be in a lot of quantities since it will depend on the government´s decision. Also, people are not going to have a lot of freedom of choice. The resources might not exist or be produced in large amounts. But not everything are going to be disadvantages since an advantage is that there will be less unemployment since the government will control it. Also, the whole country will have more wealth since not only a small amount of the population will have the benefits as ``The Free Market economy´´ does.

As a conclusion, I think that both economies will have advantages and disadvantages, which will make every single person, have its own opinions. Also, I think that no country will have a single economy since it will be a mixed one having Free Market Economies and a Planned Economies.

Fátima Crespo

  Information from the book, notes and the Internet. 

 Some pages used:

• 
  
•   http://www.enotes.com/homework-help/what-advantages-disadvantages-free-market-eco-389689
•     http://www.dineshbakshi.com/as-a-level-economics/basic-economic-ideas/117-revision-notes/1350-market-economic-system
•      http://www.ehow.com/list_7488099_advantages-planned-economics.html

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[1] http://www.investopedia.com/terms/c/centrally-planned-economy.asp

[2] http://www.investopedia.com/terms/f/freemarket.asp