Freedom of choice and enterprise – the consumers can buy what they please, the laborers can work where, when and if they please and the investors can invest whatever property they please (-freedom of choice) - the firms are free to enter whatever markets, obtain resources in any way they can, and organize their affairs as best as they can (-freedom of enterprise). However, the government must set “rules of the game” to prevent firms from engaging in unfair practices
3. Competition – firms compete with one another for sales (in a perfect capitalism no firm controls the price of products Þ firms must jump to the tune of consumers)
4. Reliance upon market – free market plays a central role

The second way of solving economy problems is COMMAND ECONOMY. In this way, the influence of government is very big. Lands and capital are owned by the government, which makes the decisions about production and distribution. The government is also the employer of most workers and tells them how to do their jobs. And the government decides how the output of the society will be divided between goods and services = in a command economy the government makes all decisions and answers all economic questions through its ownership of resources. This system was used in the USSR and some other countries, but as time goes on number of countries with this economic system decreases.

No contemporary society falls completely into either of these categories Þ all societies are MIXED ECONOMIES, with elements of market and command. The American economy is an economy where both government and private decisions are important. Most decisions are made in the market place, but the government modifies the functioning of market – it sets laws and rules that regulate economic life, produces educational and police service, and regulates pollution and business.

Russian and other former socialist economic in Eastern Europe are searching for their own particular brands of the mixed economy.