Can a Market Economy Solve Scarcity More Effectively Than a Command Economy?
This question compares two major economic systems in how they manage the fundamental problem of scarcity — limited resources against unlimited wants. Use the cards below to understand each part of the argument clearly.
1?? Key Concepts
- Scarcity: arises because resources are limited but wants are unlimited.
- Shown by the area outside a PPC (Production Possibility Curve).
- No economic system can completely eliminate scarcity — only manage it.
2?? Market Economy
- Relies on private ownership and the price mechanism.
- Encourages competition, innovation, and efficiency.
- Can increase total output and improve living standards.
- However, wants expand as needs are met ? scarcity persists.
- May lead to inequality and neglect of public goods.
3?? Command Economy
- Government plans and directs all economic activity.
- Can focus on essential goods and social welfare.
- Promotes equitable distribution of income and output.
- But often suffers from inefficiency, shortages, and low motivation.
- Results in generally lower living standards than market economies.
4?? Evaluation / Conclusion
- Both systems cannot remove scarcity, only manage it differently.
- Market economy: more efficient but less equitable.
- Command economy: fairer but less efficient.
- Mixed economies combine efficiency and social welfare goals.
Exam Tip: In a 12-mark essay, balance analysis with evaluation. Explain how each system tackles scarcity, then make a clear judgement — e.g., “A mixed economy manages scarcity most effectively by combining market efficiency with social welfare.”
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