Characteristic

1.Pure Market
Economy

2.Pure Command
Economy

Role of Government

Little or No role of
government

Decide all the economic

Activities

Freedom of choice

Consumer and producer

have freedom of choice

No freedom of Choice

Ownership of
resources

Private sector

State/Public sector

Price determination

Price mechanism system

determines price

Government sets price

Which Sector
answers the basic
economic questions

Private sector

State / public sector

Comparison among Economic systems

Pros & Cons of Economic systems
Pure Market Economy
Advantages

3.Islamic Economic
system

4.Mixed Economy

The state also can further

interfere in this free
economy to restore
equilibrium and establish
justice and other Islamic
objectives

Government creates
laws and regulates
business activities

Freedom of work and

Enterprise

Limited freedom of
choice given
government controls

Owner of Everything is
ALLAH
Price should be sets in
Islamic way Normal price
Owner of everything is
ALLAH

Both public and

private sector
Price mechanism
system but regulated
by government
Both public and
private sector

Disadvantages

1. Manufacturers are free to produce what the consumers demand

and the consumers in turn are free to spend their money as they see
it fit..

1. Since the making of profits is the dominant motive

of the private sector, only goods and services that
yield the highest profit will be produced.

2. The decision of what to produce is not controlled by government or

any single individual/firm. Hence, there is greater participation in the
decision-making process.

2. Since there is no government intervention in this

type of system, consumer could be exploited through
the charging of high prices for essential goods and
services.

3. A large variety of goods and services are produced to satisfy the

needs of consumers.

3. This system leads to great inequalities as the few

rich get richer and the many poor get poorer.

4. Prices are determined by the forces of demand and supply (the

price mechanism).

4. There is much pollution associated with this system

especially when industrialization begins to develop.

5. There is freedom from government interference.

5. There tends to be an over-consumption of demerit

goods such as alcohol, cigarettes and drugs.

6. Efficient production is promoted since resources are allocated to

their most profitable use.
7. Competition among firms improves quality, keeps prices low and
spurs new technology and innovation.

Pure Command Economy

Advantages
1. The welfare of all citizens is the primary goal

Disadvantage
1. No freedom of choice for consumers or producers

2. Full employment of all available resources

2. System is too rigid to adjust when changes occur, can result

in shortages

3. Government possess the information to be able to

direct resources where they are most needed.

3. Lack of incentive for workers results in low morale and

efficiency. Managers also are not motivated.

4. Wasteful competition is avoided

4. There are too many officials, and too much unnecessary

procedure and paperwork (red-tape or bureaucracy)

5. There is no industrial unrest such as striking, as the

government controls wages

5. Conflicts of interests can arise because what the country

needs may not be what the people want.

6. Greater emphasis on quality of life than on quantity

produced.

6. There is wastage of manpower because large numbers of

people are required for central planning.

Mixed Economy System

Advantage

Disadvantage

1. The state can intervene in areas of the economy

through the passing of laws to protect citizens from
unfair trading practices.

1. Too much government regulation may dampen the free

enterprise spirit.

2. Both the government and the private sector can

cooperate in offering certain services; e.g.
transportation, health care.

2. Some state-owned industries are allowed to operate

inefficiently, thus wasting resources.
3. Where government intervenes in the market by setting
maximum and minimum prices, this may cause excess demand
or supply, which may be difficult to regulate in the long-run.
4. Since the private sector helps to answer the economic
questions, there can be the creation of monopolies.
5. Inequitable distribution of wealth can also arise.

Islamic Economy System

Advantage
1. Economy is shaped largely by
religion.
2. Freedom of work and enterprise.
3. A special concept of ownership.
4. This system is based on equality.
5. Profit and loss sharing principle
exits in businesses.

Disadvantage
Only Islam Permitted things you can
produce.
Profit should be Normal.
Interest is prohibited.

Which Economic system is best for Afghanistan?

In Afghanistan government is not so much active to provide jobs to every person and also rich
people are becoming rich with their money and selling the products in high price in market and
there is no Law to ask them and stop them from selling low quality products in market. And poor
people are getting poorer day by day. Islam essentially allows economy to operate freely
according to the market forces subject to Islamic restrictions and guidelines on production.
Distribution, Marketing, investment trade, exchange, wages etc. the state can also further
interfere in this free economy to restore equilibrium and establish justices and other Islamic
objectives. In an Islamic economy, there is an allowably constraints an entrepreneur can
produce only permitted things. Profit should be in normal in such an economy after giving
proper wages to the laborers in accordance with Islamic principles. Some forms of trade
practices, exchange, investment, and land tenancy in agriculture are prohibited in Islam. It also
disallows monopoly and hoarding as social evils. The aforesaid restrictions make free economy
in Islam qualitatively different from capitalism. Islam cannot be said to be capitalistic only
because it allows forces of demand and supply to operate in the economy. Forces of demand
and supply operate in the economy. Forces of demand and supply are fundamental economic
forces, which were operational even before capitalism. Islam prohibits interest. This requires a
total reorganization of the economy, Banking, investment, exchange, business and international
trade. In Afghanistan Islamic economy system is best. Because we are Muslims and we should
follow the Islamic economy systems and Islamic economy system is best system all over the
world. Non-Muslims use Islamic rule in there economy so we have our religion and it is best
economy system so we should follow Islamic economy system.