Question

in a central planned economics

Answer 1

A centrally-planned economy (CPE), also known as a command economy, is an economic system which is commonly associated with Communist or socialist governments; In this system, the government makes all the decisions regarding the economy from production to the cost to consumers. It differ from market economies.

In a CPE, consumers have no influence on the decisions of producers in determining the quantity and price of goods that are manufactured, while in a market economy producers are allowed to compete with one another and supply and demand determines the availability and cost of goods. There are those who argue that centrally-planned economies are advantageous because rather than being driven by profits, the central motivation is to make certain that the needs of the citizens are met. Because the companies in a CPE are owned by the government, they are subject to laws and closer regulation. It can overcome market failure and achieve equality of distribution. Scope for inefficiency due to lack of incentive and corruption due to power of bureaucracy

Examples of Central Planning

• The Soviet Union 1917-1991 and Soviet Bloc
• China until the late 70s
• Cuba