How does a free enterprise economic system differ from a communist economic system?

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mkoren eNotes educator| Certified Educator

In a communist economic system, the government controls most aspects of the economy. People have far less freedom in terms of making economic choices. A communist government generally develops five-year plans for the economy. The government decides what resources will be used, where they will be used, and how they will be used. People are less willing to invest money and take chances on developing new products. This generally falls to the government.

In an economy based on the principles of the free enterprise system, people have lots of choices that they may make. People are free to choose what businesses they may form, where they may invest their money, and how resources will be used. There is much less regulation of businesses in the free enterprise system. As a result, people are more willing to invest in new ideas and technology. The opportunity for significant profits is greater than in a communist economy. Economies based on the ideas of free enterprise tend to have more economic activity occurring.