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1.1.6 Free, Command, and Mixed Economies

Any economy seeks to solve the Basic Economic Problem (BEP) of scarce resources and unlimited wants.

If an economy were to ask questions:

  • What is to be produced?
  • How?
  • And for whom?

Economic agents are interdependent, meaning that an action taken by one group has an effect on others.

Free Market Economy

A free market attempts to solve the BEP with as little intervention from the government as possible.

Command Economy

A command economy is one where the state and its central planners make most of the decisions regarding resource allocation.

Mixed Economy

A mixed economy, as the name suggests, is a mix between the two types, where resource allocation is determined by both the state and the market forces of supply and demand.

Example: Economic Spectrum

If you know a bit about the history of the USSR (e.g., think GCSE History Cold War) and especially its economic policies, in addition to the economic policies of modern day Russia, then this spectrum will actually be interesting for you.

A stylised 0-10 line placing selected countries and historical periods between a tightly planned command economy and a liberal free-market economy.

Hover over any point to see the reasoning.