Must-Know about Command economies and Market economy

Definition of Economic System

Economic System is a kind of system or process of production, allocation of resources, and distribution of goods and services within a community or a geographical area. This a very broader definition as it includes many individuals who help the government to build a proper economy in the country. it also takes into consideration about consumption and purchasing power of the society so that it can able to make proper kind of decision in the company.

Types of Economic System

There are four types of Economic System,

  1. Traditional Economic System
  2. Command Economic System
  3. Market Economic System
  4. Mixed Economic System

Similarity between Command Economies and Market Economies

In both Economies the first things are common is both take into consideration of the factor of production, so both economy work under different circumstance but both take into consideration the factor of production in the economic activities.

According to Amy, a senior marketer at Myassignmenthelp, “The second and most important similarities are that in both the government interfere as it is known that in Planned economy all the decision are in the hand of government”. So it takes the proper amount of decision but in the Market economy the decision authority is into the hand of firm or individual. But sometimes the government has to take the stand and able to meet the economy decision so that the society is able to survive in the market and also that is able to manage the fuller utilization of resource in regards to the factor of production. 

Problems in Command Economy

Each economy system has some kind of problem, so does the command economy, which is shown below:

1. Control over fair competitions

Economy is controlled by the government, so the government takes all the decisions to the factor of production. So it let them control over the market. Sometimes it happens that the government controls the price in the market. and able to stop a private company from making any kind of profit so this is a problem as it does not let the private company expand more business in the economy. 

2. Inefficiency

The Government, is the sole decision-maker. So it may happen that the government is not able to run the business properly and effectively. Which can result in not proper management in the company. As being the sole owner, it may happen that the government is not able to meet all requirements properly. Which may result in inefficiency. As a result, the country may go into some kind of economic slum. Which may result in a high level of turnover in the country.

3. No Innovation

The government control the whole system. So it does not allow the private firm to enter the market and do some kind of innovation in their product. As the government is able to control the price. So it does not allow any firm to increase the price. As a result, the company is not able to do any kind of innovation which result in some kind of good and service in the market.

4. Consumer Needs and Preference

As the centralized body is very vast. It also has many kinds of duties and responsibilities. So it becomes very hard for the government to know details of the need and preference which is required by the customers as it is not easy for the government to take care of all the needs of customers, so it keeps on producing the same kind of product, and as a result, it is not able to meet the proper requirement of customers.

5. Lack of Flexibility

It can be said that, the government force the employee to work as per their need and preference. So this stop them from moving ahead as it is not able to move them forward in its career. Which directly affects the training and growth of respective employees. So it can be that the product which the government is able to produce is not able to meet the requirement of the customer. So it is a problem as if the company product is a not able to meet the demand then it will be the waste of the factor of production, and also the company will not be able to do proper utilization of resources.

Author Bio: Nicole is a marketing manager having eight years of experience.. He has worked with several famous companies like ‘My Assignment Help. Nicole has also written an e-book on content marketing. He likes to watch movies in his free time.


Ricky is an academic consultant who is currently working with a reputed company in Australia. He is also associated with My Assignment Help, where he guide students to help them choose better service. He also loves to play tennis.