Key terms
- Market economy
- A market economy is one where economic decisions are decentralised, private individuals own resources, and businesses supply goods and services based on demand.
- Command economy
- A command economy is one where economic decisions are passed down from government authority and the government owns the resources.
The two systems differ over who decides what to make, how, and for whom
In a command economy the government decides which goods and services are produced and what prices are charged for them, which methods of production are used and what workers are paid, and it owns the resources and the businesses. In a market economy those decisions are decentralised. Private individuals own and run the businesses, firms supply goods and services based on demand, and a person's income depends on how much society values what they produce.