how are central problems solved in different economies
Answers
Answer:
Basic problems in Capitalist economies are solved through price mechanism, in Socialist economy through planning and in mixed economy through price mechanism and economic planning. ... In the same way, price of the factors of production is determined in the factor market.
Explanation:
Answer:
Different economies solve the central problems differently.
Following are the details :
(1) MARKET ECONOMY = A Market economy is an economy system in which economic decisions and the pricing of goods and services are guided by the interactions of a country individual citizens and business. There may be some government intervention or central planning, but usually this term refers to an economy that is more market oriented in general.
(2) CENTRALLY PLLANED ECONOMY. = In a centrally planned economy, decisions relating to WHAT, HOW and WHOM TO PRODUCE are taken by some central authority appointed by the Government of the country. All decisions are taken with a view to maximising social welfare. Unlike market economy profit maximization is not the consideration. Those goods and services will be produced with the central authority (or the govt.) finds as most useful for the society. That technique of production will be adopted which is socially most useful.
In a situation of Mass Unemployment, For Example :
Labour intensive technology will be preferred (rather than capital intensive technology) So that unemployment is reduced. Goods will be produced preferably for those residents who are suffering from hunger or starvation even if it leads to losses ( lower revenue, and higher cost).
(3) MIXED ECONOMY =
(a) It combines the merits and avoid the
demerits of market and centrally planned
economy.
(b) Decisions regarding WHAT, HOW and for
WHOM to PRODUCE are taken on the basis
of market forces as well as on the basis of
social considerations. In certain areas of
production, producers are free to take their decisions with a view to maximising profits.