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Free Market Economy vs. Command Economy Aim: How did economic competition between the U.S. and the Soviets enable the U.S. to win the Cold War? If you went shopping, which picture would you prefer to see? What is the difference? Free Market Economy A free market economy is an economy where the market is free to operate based on peoples wants and needs. In a free market, the economy is driven by a government that practices a laissez-faire, rather than controlling its economic policy. The forces that rule the marketplace are: Supply, Demand, and Competition. The U.S. has a free-market economy. Free Market Economy Supply And Demand Supply and Demand decides what ite ms will be produced, who will be mak ing the items and what the prices for the items will be. Command Economy In a Command Economy, the government co ntrols all means of production. Examples of the Command Economy were th e Stalin’s 5 Year Plans and Mao’s “The Great Leap Forward” The government decides what items will be made and at what price. The Soviet Union had a Command Economy. Command Economy Go to the Tips website and get the worksheet to Evaluate the U.S. policy regarding our economic system – a free market economy. The U.S. favors a free market economy. Why do we feel that a Command economy is not good for the people? Economic Competition Between the East and the West Products produced in the Soviet Union: Industries in the Soviet Union c oncentrated on large industrial production. They produced such items as tr actors, weapons , electrical gen erators, etc. They produced very few consu mer products. Products Produced by Western Technology In the West, these are the types of products that we, the consumers, are interested in. Results of the Command Economy •Soviet Unions government didn’t allow Soviet industries to produce enough consumer goods. •This caused the east to suffer from hunger and insufficient amount of clothing. •The Soviet Union were involved in a war in Afghanistan between 1979-1989. This took huge sums of money from consumer goods to support the war. •The Soviet Union began to lose the Cold War in the 1980’s due to the effects of the Command economy. •Because of free-market economy, the West was able to make great improvements and produced more goods that were available to the public. •People under communism, weren’t able to experience these new goods. They were either not sold to the public in that area, or the goods were too expensive for them to buy. Go to the TIPS website to get the Comparative Analysis worksheet and compare the free market economy of the U.S. with the command economy of the Soviet Union. How did Supply and Demand, Competition, and the incentive to make a profit allow a free market economy like the U.S. to “defeat” the Soviet Union in the Cold War? The West was able to win the Cold War because they spent a lot of their money on developing and providing consumer goods to people. The Soviet Union however, used their money on military weapons, farm equipment, and tractors. Homework: Write an essay describing why you would prefer to live in a country that has a free market economy instead of a country with a command economy. Be sure to include reasons why you prefer a free market economy like ours – think of some of things that you, your friends, and your family like to buy.