What Is Economy?
An economy is a system of organizations and institutions that either facilitate or play a role in the production and distribution of goods and services in a society. Economies determine how resources are distributed among members of a society; they determine the value of goods or services; and they even determine what sorts of things can be traded or bartered for those services and goods.
How a society structures its economic system is largely a political and social issue. The political and legal structure of a society will govern how wealth can be accumulated, how wealth and resources are distributed, and the manner of competition permitted between different participants in the economy.
Market Systems and Command Systems
…show more content…
This might sound familiar if you live in the United States, because the U.S. is a market economy. You are able to bargain your labor for wages, and use your property as you see fit (so long as it's not illegal).
In a market system, the law of supply and demand governs the economy. If there is a high demand for a product, resource or skill and a low supply of it, it will demand a high price to purchase it. Alternatively, if there is a low demand and a high supply, the price will be low. In other words, the market sets the price of goods, services, and labor. Demand will also determine how much of a product will be produced, or even if it will be produced at all. In a market system, you can engage in any type of lawful economic activity that you want, so long as you can pay for it.
A command system is an economic system where economic decision-making is centralized and usually in the hands of the state. The government controls the factors of production and makes the decisions about what to produce, how much to produce, and to whom the products ultimately go. In theory, the idea is that all production and distribution is directed towards socially-desirable goals. Classic examples of command systems include the economy of the old Soviet Union and the current Chinese