Question

Think about the evidence presented in the video for why market economies prevailed over Soviet-style communist economies. Match the evidence from the video with the economic statement it supports.

Answer 1

Answer:

A market economy is an economy that is primarly based on free markets, where consumers and producers meet to buy and sell goods and services, and prices are set according to the forces of supply and demand.

A Soviet-style communist economy, is also known as a planned economy or command economy. This is an economy where private property does not exist, the government owns all property, and plans the economy with years of anticipation. Prices are set by the government, as well as the quantities of goods and services that are produced and delivered.

The problem with planned economies is that it becomes too difficult for the government to coordinate economic activity. The government lacks a lot of vital information, and ends up assigning resources to activities that are not efficient. These economies also lack proper prices, which are the signals that coordinate economic activity.

For that reason, the market economies prevailed over the planned economies, they were simply more efficient: better at producing more goods and services, at cheaper prices, and using less resources.