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MARKET AND COMMAND ECONOMIES

Economics is a science that analyses what, how, and for whom society pro-duces. The central economic problem is to reconcile the conflict between peo-ple's unlimited demands with society's ability to produce goods and services.

In industrial Western countries markets are to allocate resources. The market is the process by which production and consumption are co¬ordinated through prices.

In a command economy, a central planning office makes decisions on what, how, and for whom to produce. Economy cannot rely entirely on command, but there was extensive planning in many Soviet bloc countries.

A free market economy has no government intervention. Resources are allocated entirely through markets.

Modern economies in the West are mixed and rely mainly on the market but with a large doze of government intervention. The optimal level of government intervention remains a problem which is of interest to economists.

The degree of government restrictions differs greatly between countries that have command economies and countries that have free market economies. In the former, resources are allocated by central government planning. In the latter, there is not any government regulation of the consumption, production, and exchange of goods. Between the two main types lies the mixed economy where market and government are both of importance.

INFLATION AND PRICES

Here is a part of a television programme about inflation and prices in the U.K.
The prices are for a pound of food, not a kilo. A pound is about 450 grams.

The reporter:
Inflation in Britain is running at about 15 per cent. These figures don't seem to mean very much, but when you look at the price of food, you understand what inflation means to the ordinary person. These are the prices you have to pay in the supermarket. Flour is 40 pence a pound and rice is 50. For a pound of sugar you'll have to pay 15 pence. Compare that with the price of sugar four years ago and you can see a real price difference.
Tomatoes are 1 pound sterling that's because it's a little early for tomatoes at the moment. Potatoes are 30 pence a pound. Peas and beans are 60 and 90, apples are 75. Onions are 60 pence a pound, bananas 50 and and sausages, the children's favourite, are 2 pounds sterling. Cheese has reached incredible 3 pounds sterling a pound, and if you follow me over here to the meat counter, you'll see a lot more. London has been truly called the most expensive city in the world, though, like all other cities, if you know your way around, you can always find lower prices than people normally pay. Transport is expensive in London compared with other places. The fares on the underground and taxi fares are very high.
Some things are really expensive, accommodation for instance.
Telephone calls to another London number, to say nothing about long distance calls, are rather expensive.
And clothes?.. It's difficult to find an average price for clothes, because there is a big difference in the price range, depending on the kind of shop you buy your clothes in and what quality you buy.