ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In its purest form, a market economy answers the three economic questions by allocating resources and goods through markets, where prices are generated. In its purest form, a command economy answers the three economic questions by making allocation decisions centrally by the government.

Detailed explanation-2: -Capitalism-individuals own the factors of production and answer the basic economic questions.

Detailed explanation-3: -There are three main types of economies: free market, command, and mixed. The chart below compares free-market and command economies; mixed economies are a combination of the two.

Detailed explanation-4: -Market economies are tied to capitalism, an economic system where private entities or people own the means of production. Capitalism needs the forces of supply and demand in the market economy to distribute goods and services and set prices.

Detailed explanation-5: -Which types of economic systems must contend with the three basic economic problems of what, how, and for whom to produce? Centrally directed economies, market economies, and traditional economies.