Political Economy Economic Systems Questions
A planned economy, also known as a command economy, is an economic system in which the government or a central authority makes all the decisions regarding production, distribution, and resource allocation. The government determines what goods and services are produced, how they are produced, and who receives them. In a planned economy, there is little to no private ownership of resources or means of production.
On the other hand, a market economy, also known as a free market economy or capitalism, is an economic system in which decisions regarding production, distribution, and resource allocation are primarily determined by the interactions of buyers and sellers in the marketplace. In a market economy, individuals and businesses have the freedom to own and control resources, make decisions about production and consumption, and engage in voluntary exchange based on supply and demand.
The key difference between a planned economy and a market economy lies in the level of government intervention and control. In a planned economy, the government has significant control over economic activities, while in a market economy, individuals and businesses have more autonomy and freedom to make economic decisions.