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Imagine a country where the goods and services that are produced are based on the market. The market decides who gets them and how the economy grows. This is called a Free Market which is also known as Capitalism. In capitalistic countries citizens have sole ownership of their land or businesses. Profit is the motivating factor in this economy. The citizens are more willing to work due to the retention of profits from their businesses. Corporations are able to issue bonuses and rewards for those with high productivity. Businesses can establish themselves or trade with other nations for more profit.
There is limited government input in a free market economy. Businesses compete with each other giving the consumer a wide variety of goods and services at a low competitive price. The market is determined by supply and demand. The citizens in a free market have the ability to elect officials into office that they feel would make a difference. They have freedom of speech, religion and press. They have the rights that were governed by the United States Constitution. In a command economy the government decides the goods and services that are produced, who gets them and how it will affect the economy.
Socialism and Communism are both variations of this economy. Socialism is a medium between a free market and a communism economy. The major businesses are owned by the public while small businesses are still private. In this economy the Government will control health care, education, media and transportation. The private owned companies can still motivate their workers by providing monetary incentives and are provoked by profit. The public companies however are monitored by the government and therefore have limited incentives.
Trading with nations in the socialistic economy has a lot of restrictions. The government even controls who goes to college. A communist economy the government controls almost ever aspect of the market and civilian freedoms. All businesses are publically owned. The markets are controlled by the government fully and there is very little choice for consumers. Citizens do not have freedom of speech, religion, and press. The two economies are completely different from each other. Either the government has the reigns in a command economy or the people do in the free market.
North Korea is an example of a communist country. The people have very little rights and the government makes all the decisions. The United States is an example of a free market economy, were the people control the market and their choices, the government has very little input. Lastly Sweden is an example of a socialist country were the government has more input then the people, but the citizens still have some choice. Nickels, W. , McHugh, J. , & Mchugh, S. (2010). Understanding Business. (9th ed) Avenue of Americas, New York: The Mcgraw-Hill Companies, Inc.