Name: Introduction to Microeconomics - 3
Uploaded: 2019-07-19
Duration: 6 min 15 s
Description: Learn the basics of microeconomics, including key concepts and principles that drive consumer behavior and market dynamics in this engaging introductory video.

Question

Distinguish between a centrally planned economy and a market economy.

Accepted Answer

The differences between a centrally planned economy and a market economy are:

Centrally planned economy:

An economy in which the government functions as the central authority and takes important decisions pertaining to the production, distribution, and exchange of goods and services is referred to as the centrally planned economy.

The scarcity of raw materials can be solved with the intervention of a powerful authority so that they are handled efficiently.

Equitable production and supply of goods and services are possible in this type of economy.

Market Economy:

The economy in which its activities like production and supply are determined and organised by the market is referred to as a market economy.

This is a kind of institution in which interaction is direct between the producers and consumers.

Fixation of price is agreed mutually between them and occurs at the exchange place.

Distinguish between a centrally planned economy and a market economy.

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