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.
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 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.
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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.