Economics – The basic economic problem - Resource allocation decisions | e-Consult
The basic economic problem - Resource allocation decisions (1 questions)
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(a)
- Planned Economy: In a planned economy (also known as a command economy), the government makes all the major decisions about what goods and services are produced, how they are produced, and for whom they are produced. The government owns most of the factors of production (land, labor, capital). Production is based on a central plan determined by the government.
- Market Economy: In a market economy, production decisions are determined by the interactions of buyers and sellers in the market. Private individuals and businesses own the factors of production. Prices are determined by supply and demand. Consumers decide what to buy through their purchasing decisions.
(b)
| System | Advantages in Production Decisions | Disadvantages in Production Decisions |
| Planned Economy |
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| Market Economy |
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