Command vs. Market Economies: Understanding Economic Systems

Economics Grades High School 9:44 Video
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Lesson Description

This lesson introduces students to the fundamental differences between command and market economies, exploring how each system addresses the core economic questions of production and distribution.

Video Resource

Command and market economies | Basic economics concepts | AP Macroeconomics | Khan Academy

Khan Academy

Duration: 9:44
Watch on YouTube

Key Concepts

  • Command Economy: Government control over production and distribution.
  • Market Economy: Decentralized decisions driven by supply and demand.
  • Incentives: How different economic systems motivate producers and consumers.
  • Economic Questions: What, how, and for whom to produce.

Learning Objectives

  • Define the key characteristics of command and market economies.
  • Compare and contrast the roles of government and individuals in each type of economy.
  • Analyze the strengths and weaknesses of command and market economies.
  • Explain how incentives differ in command and market economies.

Educator Instructions

  • Introduction (5 mins)
    Begin by asking students what they think are the essential questions every economy must answer. (What to produce? How to produce? For whom to produce?). Introduce the concept of different economic systems designed to answer these questions. Briefly discuss the video they are about to watch.
  • Video Viewing (8 mins)
    Play the Khan Academy video: "Command and market economies | Basic economics concepts | AP Macroeconomics." Instruct students to take notes on key differences between the two systems as they watch.
  • Discussion (15 mins)
    Facilitate a class discussion based on the discussion questions provided below. Encourage students to share their notes and ask clarifying questions.
  • Interactive Exercise: Economy Sorting (15 mins)
    Divide students into groups. Provide each group with a set of economic scenarios (e.g., "The government sets production quotas for all factories.", "Prices are determined by supply and demand."). Have them sort the scenarios into two categories: Command Economy and Market Economy. Students should justify their choices. After 10 mins, have each group share one of their decisions with the class. For example, 'The government owns all farmland,' would be a Command Economy because the government controls a vital resource.
  • Wrap-up (2 mins)
    Summarize the main points of the lesson and preview the upcoming quiz.

Interactive Exercises

  • Economy Sorting
    Students sort economic scenarios into Command Economy or Market Economy categories.

Discussion Questions

  • What are the main differences between a command economy and a market economy?
  • What are the potential advantages and disadvantages of each system?
  • How do incentives differ in a command economy compared to a market economy?
  • Can you think of real-world examples of countries that lean towards a command economy or a market economy?

Skills Developed

  • Critical Thinking
  • Comparative Analysis
  • Economic Reasoning

Multiple Choice Questions

Question 1:

In a command economy, who primarily decides what goods and services will be produced?

Correct Answer: The Government

Question 2:

Which of the following is a characteristic of a market economy?

Correct Answer: Free enterprise

Question 3:

In a market economy, prices are primarily determined by:

Correct Answer: Supply and demand

Question 4:

Which economic system emphasizes individual choice and competition?

Correct Answer: Market economy

Question 5:

A major disadvantage of a command economy is:

Correct Answer: Lack of consumer choice

Question 6:

One potential advantage of a command economy is:

Correct Answer: Guaranteed employment

Question 7:

Which of the following is a primary incentive for producers in a market economy?

Correct Answer: Earning profits

Question 8:

In a command economy, resources are allocated based on:

Correct Answer: Government plans

Question 9:

What role does the government play in a market economy?

Correct Answer: Limited intervention

Question 10:

Which of the following is true of a mixed economy?

Correct Answer: It combines elements of both command and market economies

Fill in the Blank Questions

Question 1:

In a _____ economy, the government makes most of the economic decisions.

Correct Answer: command

Question 2:

A _____ economy relies on supply and demand to allocate resources.

Correct Answer: market

Question 3:

The desire for _____ motivates producers in a market economy.

Correct Answer: profit

Question 4:

A major criticism of command economies is the lack of _____ choice.

Correct Answer: consumer

Question 5:

_____ is an economic system that combines elements of both command and market economies.

Correct Answer: Mixed

Question 6:

In a market economy, prices act as _____ to guide resource allocation.

Correct Answer: signals

Question 7:

_____ planning is a key feature of a command economy.

Correct Answer: Centralized

Question 8:

One of the strengths of a command economy is the potential for _____ distribution of resources.

Correct Answer: equal

Question 9:

Competition among businesses is a defining characteristic of a _____ economy.

Correct Answer: market

Question 10:

The three basic economic questions every society must answer are: What to produce, how to produce, and for _____ to produce.

Correct Answer: whom

Educational Standards

SOC.9-12.E.2.1:Compare the world’s basic economic systems of market (free enterprise), command, and mixed market economies identifying countries that have adopted each and comparing the results such economic systems have produced in those countries as measured by GDP, national prosperity, individual income, and wealth. SOC.9-12.E.9.1:Explain the aspects of and differences between a free market and a mixed market economy. SOC.9-12.E.1.1:Define and apply basic economic concepts of money supply, scarcity, surplus, choice, opportunity cost, cost/benefit analysis, risk/reward relationship, incentive, disincentive, and trade-off to a variety of economic situations.

Teaching Materials

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