Difference between Command Economy and Mixed Economy


Financial and economic aspects can fundamentally be characterised into four kinds that are mixed economy, command economy, market economy, and traditional economy. The market economy, industrialist, free enterprise, and laissez-faire are the terms that are utilised to portray the unrestricted economy, while a command economy is like a communist economy. The unrestricted or free economy is constrained by private proprietors through the command economy and is constrained by the public authority. This dissimilarity in control can be named as the fundamental contrast between an unrestricted economy and a command economy.

In any economy, the presence and usefulness of a monetary framework are vital. This deals with the monetary inquiries in regards to the kind of merchandise that ought to be delivered. How should the products be delivered? Who should create the merchandise?

A financial framework should also think about the privileges of the buyers, makers, and government regulations. Nonetheless, major monetary choices might be made by the public authority or by the people, prompting free, market, order, or blended economies.

Meaning of Command Economy:

A command economy is a monetary and economic framework where the public authority has command over the creation and estimating of products and services. It is also known as a planned economy; in this type of economy, the public authority chooses which products and services to produce, the manufacturing and marketing technique, and the costs of products and services. The public authority is the focal organiser.

Since the public authority sets and controls all parts of the business in a command economy, there is no rivalry. Market monopoly, which is possessed by the public authority, is normal. These may incorporate monetary administrations, utilities, or even organisations inside the transportation area.

In command economies, they regularly manufacture an abundance of one type of product and insufficient of another in light of the fact that it is challenging for the government (i.e., the public authority) to understand the requirements of everybody in the country. Thus, a command economy frequently implies enormous overflows or deficiencies of goods and services.

A black economy or a shadow economy might be created to satisfy the necessities not met by the public authority. The black economy abuses a nation’s standards and guidelines on the grounds that the financial and economic exercises occur illicitly and members stay away from taxes. A shadow economy emerges when states and the government make exchanges unlawful or by making services and products exorbitant. Individuals in the economy look for ways of getting around government limitations.

The command economy does not function like an unrestricted economy or a capitalist economy. In an unregulated economy financial framework, assembling and creation depend on the powers of demand and supply with next to zero government intercession.

Examples of a command economy today include Iran, Libya, Cuba, and North Korea. China was a command economy prior to going to a mixed economy with both capitalist and communist beliefs.

Meaning of Mixed Economy:

A mixed economic and monetary framework has highlighted both an unregulated economy and a command framework since it is moderately constrained by the public authority and partly in view of the powers of the law of demand and supply. A large portion of the fundamental economies on the planet are presently blended or mixed economies, which work under a mix of capitalism and socialist economies, and governments in most mixed economies utilise financial or money-related strategies to animate development during monetary or economic slumps. This might come as corporate bailouts, changes in loan costs, or other boost bundles.

By and large, a mixed monetary framework incorporates private and public sectors. There is limited government law and regulations in a mixed economy, while there is heavy government law, regulation, and control in a command economy. In a mixed economy, the government permits companies to benefit, yet the levels of benefit may be restricted by tax collection or by forcing taxes.

Assume XYZ, a toymaker, is in a mixed monetary framework. The costs and creation levels are dependent upon the attentiveness of the organisation and driven by the law of demand and supply. Nonetheless, organisation XYZ has been utilising an excessive number of natural assets in the state where it is found. The public authority can intercede on the grounds that overabundance utilisation of vital assets conflicts with the benefit of people in general. Whereas in a command economy, there is no organisation creating toys – the public authority would control the creation and evaluation of the toys.

Dissimilar to the example of the command economy, a blended or mixed economy might not have enormous excesses or deficiencies. That is on the grounds that assembling and creation are generally determined by the law of demand and supply, so the dissemination of products and services happens where and when required. Costs additionally are directed by the law of demand and supply instead of by the public authority, as in the command economy. The benefit of makers and advancement is additionally a key component of the mixed monetary framework.

Difference between Command Economy and Mixed Economy:



Goods and Services Distribution

Appropriation of products and services are chosen by the public authority, so there are an equivalent or fair income circulation practices.

The dissemination of products and services is chosen by firms themselves, so income appropriation isn’t comparable.

Output Quantity

The public authority chooses the number of results.

The market demand chooses the amount of output.


Land and different assets are possessed by the public authority.

Responsibility for and assets are with people or firms.

Product and Services Choices

Consumers have fewer decisions in the order economy as what to produce is simply an administration choice.

The selection of products accessible to consumers is higher.

Price Determination

Prices are fixed by the public authority chiefs.

The cost of products and services is set by the law of demand and supply.

Division of Labour

No division of work is involved.

The market depends on the division of work.

Role of the Government

The public authority has full command over every financial and economic activity.

The public authority has little impact on monetary exercises.

Decision-making Process

The direction is brought together and done by the approved government substances.

The final decision is made by a few people like purchasers, dealers, mediators, and so forth.


A command economy and mixed economy are totally common monetary sorts. In a mixed economy, there’s no administration mediation in financial exercises; along these lines, balance is automatically determined as per the aims of the market players. Conversely, a command economy includes full government command over the whole economy. In any case, 100 per cent of government mediation will, in general, put private organisations down; thus, financial backers are additionally deterred from putting resources into the country. Yet, a fair mediation is expected to shield buyers from market influences and to deal with the cultural effect on the free economy. Subsequently, a mixed economy can be recognised as the best sort of economy for both individual and cultural prosperity.

Also, see:

Importance of Sustainable Development

Meaning of Economic and Non Economic Activities

Economic Reforms

Central Problems of Economy Study Material

Circular Flow of Income and Methods of Calculating National Income

Meaning of Rural Development

Human Development Index Meaning and Its Indicators

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