Final answer:
The main difference between market and command economies is who makes the key economic decisions. Market economies are driven by consumer and firm decisions based on supply and demand, whereas command economies are controlled by government planning and directives on production, pricing, and distribution.
Step-by-step explanation:
The fundamental distinction between a market economy and a command economy revolves around who is responsible for the economic decisions that dictate the production, distribution, and consumption of goods and services. In a market economy, these decisions are primarily made by consumers and firms, acting through the mechanism of supply and demand. Decisions about what to produce, how to produce it, and for whom are determined by the market, often leading to a wider array of goods and services driven by consumer preferences.
In contrast, a command economy is characterized by economic planning and decisions made by the government. The government decides which goods and services will be produced, the methods of production, the prices, and the wages for workers. This includes the provision of certain necessities like healthcare and education, often at no cost to the consumer. Examples of countries with command economies include Cuba and North Korea.
While market economies rely on the principles of private property, voluntary exchange, and competition to shape production and consumption, command economies depend on government directives to achieve the economic goals of the state, which often prioritizes equitable distribution over efficiency or consumer choice.