Which situation is more likely to occur in a market economy than a command economy?
An inventor designs and produces a new type of car
People line up for cheap but scarce products.
A student is guaranteed a job out of college.
A committee chooses which farms should receive new tractors.
An inventor designs and produces a new type of car is more likely to occur in a market economy than a command economy.
In a market economy, also known as a free-market or capitalist economy, the forces of supply and demand dictate the production and distribution of goods and services. Entrepreneurs and inventors are encouraged to develop new products and start businesses because they can potentially earn profits based on the market's response to their innovations. Intellectual property laws protect their inventions, allowing them to benefit financially from their creativity and investment.
The other scenarios listed align more closely with characteristics of a command economy:
- People lining up for cheap but scarce products: In a command economy, where the government controls the allocation and pricing of goods, shortages can be common due to mismanagement, lack of incentives for efficiency, or difficulty in predicting demand. This can lead to long lines for basic necessities.
- A student is guaranteed a job out of college: In a command economy, the government might plan employment and assign jobs to ensure low unemployment levels, sometimes regardless of the market demand for certain professions.
- A committee chooses which farms should receive new tractors: In a command economy, central planning committees typically make decisions about the allocation of resources and capital investment according to the state's economic plans, rather than allowing market forces to decide.
In contrast, in a market economy individual decisions and market signals guide resource allocation, production, and investment, fostering an environment in which individuals are more likely to design and produce new products like a new type of car.