 Because we have an enormous number of wants, both individuals and governments face the fundamental economic problem of scarcity.

Others, like Cuba and North Korea, have command economies. In a command economy the government tells producers what to do.

One of the many reasons for the collapse of the Soviet Union was the overall failure of the "command economy". Unlike the "market economy" where prices of goods and services are set by the forces or supply and demand based on the purchasing decisions of consumers, prices in a command economy are set centrally and resources are allocated based on government priorities. Because it is impossible for governments to make the millions of minute decisions required to keep an economy running, serious problems resulted.

The photograph below, taken in 1971, shows Moscow stores with a limited supply and selection of consumer products. Fruits and vegetables that were available, were often of poor quality, due to problems throughout the supply chain. Muscovites routinely had to stand in long queues to purchase everyday consumer items. This lost time was a hidden cost that caused resentment of the government.

Most countries of the world have a mixed economy, which combines basic elements of a pure market economy and a command economy.