EMILY ODERO

An economic system is a system of production, resource allocation and distribution of

goods and services.
Economic systems regulate factors of production.
There are different economic systems. They include: command economic system,
market economic system and mixed economy system.

Command economic system

Here, a large part of the economic system is controlled by a centralized power. This
economy is the backbone of the communist philosophy.

This economy is able to reward its people with affordable prices while creating a
healthy supply of its resources.

Here the government is able to create adequate jobs. The government also provides
goods and services at affordable prices.

The government pays more attention to the society rather than the individual.

The government controls factors of production and determines the methods of

production to be used and how much workers will be paid.

Market economic system

A market is any circumstance uniting both the buyer and seller.

In this system, private entities are permitted to a lot of economic power. Goods are
distributed in terms of supply and demand.

One’s income is determined on their ownership of resources. There is a competitive

and free market.

In this competitive market there are huge numbers of buyers and sellers therefore the
market price is uncontrolled while in the free market, the government is nowhere
associated.

In the market economic system, the government exercises little control over
resources.

The government maintains the rule of law.

The government also provides services and public amenities and also chips in when
the market gets things wrong.
Free market is also associated with a capitalist economy. As opposed to socialist
economy where markets follow plans made by the government. This reduces the
‘freedom ‘of the market mechanism, though a ‘market’ may still exist. The ‘freedom
given to the market mechanism is therefore the crucial distinction between capitalism
and socialism.