Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 2 - The Market System and the Circular Flow - Questions - Page 44: 10

Answer

In market economies, the free enterprise system allows every resource to be made to the extent which the consumers demand it. In a command economy, the government controls everything and the government is typically out of touch with consumer needs and production demands.

Work Step by Step

In a command economy, production quotas are all that matter. This causes many shortages and surpluses of different goods because production is not adjusted based on demand. In contrast, a market economy produces what is needed by consumers and therefore does not have to worry about resources, because needed resources will always be produced.
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