Economic system is defined as the basic arrangements made by societies to solve the economic problem. There are three economic systems that classification by degree of government control. The three economic systems are Command Economy System (Socialism). A system where the government, rather than the free market, determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale. The command economy is a key feature of any communist society. Example of country that under this economy system are North Korea, Cuba and Russia. Market Economy System (Capitalism) is an economic system in which economic decisions and the ...view middle of the document...
How the product is produced, what product is produced and for whom to produced are planning committees dictate by the government. The state plans the allocation of resources at three important levels. First is central government plan the consumption and investment by produce more capital goods to have the better economy and increase the economy growth rate. Nest is matching of inputs and outputs. Central government will plans the output resources required for each industry and firms. Governments will distribution of output between consumers according to their needs or the money incomes.
Now a day, many countries have become more open, but some country still maintain in command economy system, example like North Korea. North Korea is the country that fully focuses in command economy system or we can call it socialism. For example, the people in this country are strict control by the government. All of the property is own by the government. The government distributes job and house for their people. This related to the characteristic of command economy which is no any private property. Next, Government of North Korea has plan the trading with China. Import of the North Korea has 42% is from China; and 57% of export is to China. This is also one of the characteristic of command economy system which is government plan all the trading of the country. Besides that, government of North Korea distributes all of the articles for the daily use to their people, and set the prices of the product. This related to the command economy which government distributes of output between consumers according to their needs.
There are a few of the advantages for North Korea to maintain the command economy system. First advantage is social goals pursued. All of the basic needs like foods, house, health care and education are provide for the citizens by the government. Next, high investment and high growth of the economy is also the advantage of the command economy. Government North Korea plan to divert more resources into investment to increase the growth rate of the economy. Besides that, another advantage is it has the less of inflation and other economic problem; therefore, it makes North Korea have the stable of economy growth.
Besides of advantages, command economy system also has the disadvantages. First of the disadvantage is under command economy system, people in North Korea lack of freedom. They can’t choose or decide what they want, and what they don’t want. All of the things have already distributed by the government. Furthermore, expensive to administer the country is also one of the disadvantages of command economy. The complicated plans are likely to be costly to administer and involve cumbersome bureaucracy. Nest is shortages and surpluses. Some product in North Korea will be overproduction or underproduction if consumers are free to spend money incomes as they wish, and problems occur when their wishes change.
Market Economy System...