Question

BSIT (SEM-1) ECONOMICS Assignment 1 Q. Compare the characteristics of "The Command System" and "The Market System on the basis of following five fundamental questions in Economics 1) What goods and services will be produced? 2) How will the goods and services be produced? 3) Who will get the goods and services? 4) How will the system accommodate change? 5) How will the system promote progress?

Answer 1

Macket economy is based on the rsection of the demand and supply. are are tive characteristics of the navuset economy o private property Freedom of choice Motivation of self interest ② competition 5 Limited Government -So here in the case of mareket economy production and price is based upon. interaction of the demand and supply. In this system everything is owned by prurate. Geovernment intervention for tone here. Command Economy where everything is owned by Government, some characteristics of the command economy are : 9) Government intervention (100) centralise plan Chi? NO competition i) Little individual freedom

O In the case of mareket economy Laws of demand and supply dereits the production of goods & serevices. Consumer preference & and scarcity of resource determine which goods and Services are produced and in what quantity. What to produced is determined by consee mers. . Under Command economy a deusions are made by centralized plan a here Geovernment owns the tors of production such as land, labour capital, organizations. 3 In the case of command economy 9 Geoverment is the monopolist. Under this system Government officials decide how and when to allocate peso weces to the production. Geover vernment central planners control the production. process. In movelset economy Demand a supply of the moveket directs the preoduction of goods & services. Here how to produced is determined by producers. 3 who will get the products in the case of moes et economy it depends upon the purchasing power of the consumers to command economy who will het is depend upon hovernment preferences.

It changes ove @ How will the system accomodate Change As per Law of demand as the price of a product increas en quantity temand deareases & vice versa. Besides, that under the mareket economy dynamic mares et depends on the relative things that is tastes and preferences are not perman e not ppermanent of a consumer. changes overtime. So when the demand a goods increases leads to higher Poceees in that moveset, output also nereases for that particular goods. so new firms enter into the marelset and then firm facer losses and exit into the industry 5 How will the system promote progress) In mareket economy a ite oon by the Socivate preoperty producers and consumer thoices, so here mares et system promotes technological improvements which reduce the production cost so the prices of the broduct will reduce and it will create a competition. - But in the command system leveger centralise planned economy, ale reenching those above things are not erly due to excessive cost, poor quality a proper complexity of allocation problem.