Question

1. The dominant economic models today are the capitalistic free-market system, the centrally planned economy, and the mixed economy. Please describe each and highlight the similarities and differences among them.

Answer 1

In centrally planned economy all powers are vested on central authority or government. The government will take all the major decisions like production, consumption, distribution, pricing. Example: Cuba, North Korea, Vietnam.

Mixed economy is the combination of both public and private authorities where power is divided between government and individual or private sector. Here government have some power and rest is upto supply and demand. Countries that adopted mixed economy are US, UK, India, France, Iceland.

DIFFERENCE BETWEEN CENTRALLY PLANNED ECONOMY AND MIXED ECONOMY:-

:- In case of centrally planned economy Government have all the powers. Whereas in case of mixed economy the power is divided by both government and private sectors.

:- Planned economy pricing and production only depends on government. But in case of mixed economy the production and pricing is depend on producer and demand and supply forces.

:- In centrally planned economy there is heavy government regulations. In mixed economy there is limited government regulation.

:- In planned economy there is monopoly or there is no competition. But in case of mixed economy there is existence of both private and public sector so there is competition.

:- In planned economy there is large surplus and shortages but in case of mixed economy they do not have large surpluses or shortages.

These are some differences between centrally planned economy and mixed economy.

SIMILARITIES:-

In both the case government has power. It may be fully or partially. The major sectors handled by government such as defence.

The goal of mixed economy and centrally planned economy are same that is to eliminate unemployment or employment generation.

Both aims towards economic growth whether it is centrally planned economy or mixed economy.

These are some similarities and differences of centrally planned economy and mixed economy.