Distinguish between a centrally planned economy and a market economy.

Points of Difference

Centrally Planned Economy

Market Economy

1

Ownership of factors of production

Factors of production are publically owned; i.e., public ownership.

Factors of production are privately owned.

2

Production motive

The motive of production is social welfare.

The main motive is profit making.

3

Governing factor

The production is governed by planning mechanism; i.e. according to the government plans.

The production is governed by price mechanism; i.e., by demand and supply.

4

Income distribution

The degree of inequality of income is low.

There exists unequal distribution of income.

5

Government’s role

The main role is played by the government−from production to distribution.

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.

  • 73
What are you looking for?