Southern Business School (SBS)

Institute of Southern Punjab Multan

Assignment No:
Two
Due Date: 07 April 2020

Class: BBA-8th

Section: B

Subject: International Business Management

Student Name: Hamza Javed

Complete Registration No: BBA-023R16-79

Submitted To: Sir Wajid Hussain

 Question: Discuss that Free market economies stimulate greater economic

growth, whereas state-directed economies stifle growth.

Answer

Free market economies are economies are directed by the forces of demand and supply whereas state
directed economies are those economies that are directed and controlled by the government. A free market
economy stimulates growth because businesses want to keep up with the competition and make money.
State-directed economies stifle growth because resources and income are channeled to a central agency
within the government. The government then takes up the responsibility of allocating finances back into
programs that the government deems important.

Nowadays, a free market is an economic system that is no economic intervention and

regulation by the government. In addition, in free market, the system of prices is the emergent result of a
vast number of voluntary transactions, rather than of political decree in a controlled market introduction of
supply and demand. Such as Dubai. The UAE has an open or free economy with a high per capita income
and a significant annual trade (imports and exports) surplus. 10 years ago, however, the state directed
economic or controlled market is regulated by government. Furthermore, a variety of forms of regulation
exist in a controlled market such as, over sight, anti-discrimination, environmental protection, taxation and
labor laws. This report looks at some of advantages and disadvantages of free market economic and state
directed economic.

The State-Directed economy also known as Command or Planned economy is an economic

system in which economic decisions related to the allocation of resources, production, investment, and
pricing are under the control of the government or some other authoritative body. In the 20th century, it was
popularly believed that a centrally planned economy would do a better job than an unplanned economy of
addressing the needs of the people without suborning those needs to the uncertainties and business cycles of
a free market economy. A planned economy is characterized by government control of the means of
production, even if actual ownership is private. By contrast, in a command economy, a more coercive type
of a planned economy, the means of production are almost exclusively owned by the state. The decisions
necessary in economic planning are difficult to reach in a democratic state due to the many competing
interests. Most planned economies, therefore, have generally existed only where the form of government is
an oligarchy or a dictatorship, such as the former Soviet Union, and in India prior to 1991. China, another
large dictatorship, had a command economy until 1978, when it began to permit private ownership of small
businesses with some level of autonomy in decision-making.