Question

Diffrence between a central planned economy and market economy.

Answer 1

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Points of Difference

Centrally Planned Economy

Market Economy

1

Ownership of factors of production

In central planned economy-Factors of production are publically owned; i.e., public ownership.

In market economy-Factors of production are privately owned.

2

Production motive

In central planned economy-The motive of production is social welfare.

In market economy-The main motive is profit making.

3

Governing factor

In central planned economy-the production is governed by planning mechanism; i.e. according to the government plans.

In market economy-The production is governed by price mechanism; i.e., by demand and supply.

4

Income distribution

In central planned economy-The degree of inequality of income is low.

In market economy-There exists an unequal distribution of income.

5

Government’s role

In central planned economy-The main role is played by the government−from production to distribution.

In market economy-The main role is played by private players. They decide what to produce, while the role of a government is limited to maintaining law and order in the nation.

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