difference between market economy and planned economy
Market economy and planned economy are the two major economy system in the business world now. Even though there is another economy system which is mixed economy but it’s not my topic of discussion. In order to know what the differences and similarity between these two economy systems, we have to know first what is the word economy means and then what word market means. After all we will move to these two economic system and then we will be able distinguish between them. The word economy means the management of the sources of a country. ... On the other hand, the word market means mechanism for exchange between buyers and sellers of particular good and service. The first economic system is market economy system which is based on the principles of capitalism where its used more in the world than planned economy system. Market economy is an economy in which individuals control production and allocation decisions through supply and demand. So basically it is an economic system where sellers and buyers control the market and that control comes from supply and demand rules. For example, if a buyer whose an individual went looking for a house and he or she finds a two house in the same neighborhood and they have the same design but one of them is offered in the market by the seller whose and individual also for $200,000 where as the second house is offered in the market for $190,000. ... Now the higher price house seller might consider lower the price for his house to sell because there is a demand in the market and there are supplies also and that’s creating a competition. ... So that’s how market economy works. Both the buyer and the seller who are individuals control the market and prices and they both have the freedom to sell and buy and they have no control over them. In the market economic system, the government has less control Now the second economic system is planned economy where neither the buyer nor the seller has any control over the market because the government owns everything and that’s communism. ... The government controls the economy by owning everything and paying everyone. ... An example of planned economy now is Russia and china where the government owns the most important sectors in the country, like the energy sector and transportation sector.