Benefits of Free Enterprise Economy over Command and Control Term Paper

Benefits of Free Enterprise Economy over Command and Control - Term Paper Example consists of the relations between institutions and agencies, the flow of information between them and the existence of social relations within an economy (Howard & King, 2014). There are mainly three types of economic system that exists, namely, Market economy, the Mixed Economy and the Planned Economy (Woods Jr, 2015). Market economy is associated with limited interference of government. Planned economy on the other hand is completely opposite to market economy. In planned economy, all the important decisions connected with the production, distribution and prices are taken by the state. A mixed economy is an amalgamation of fundamentals of both market economy and planned economy. This implies that certain attributes from both the economies are taken to form a mixed economy. In this type of economy, the economic decision making is undertaken by both the private sector entities and the government. The system showing mixed economic features have flexibility in some sectors and government control in others. To balance broad range of economic and political views, mixed economy involves both socialist and capitalist economic guidelines (Kaynak, 2014). Other name of free enterprise economy is market economy or laissez faire economy or capitalist economy. Before discussing the features of the free enterprise, it is essential to have a clear idea regarding the definition of market. Lewis, (2013) defined market as a structure where buyers and sellers are engaged in the process of exchange of goods, information and services. It is a place where demand and supply of a commodity is created. When the supply of a good is equal to its demand, then this leads to equilibrium. At this point, equilibrium quantity and equilibrium prices are determined which implies that the allocation of goods has reached its optimal point. It has been examined by Kaynak, (2014) that concepts of supply and demand help in structuring the pricing system. When availability of goods is larger than its