Theory question 103
Economic Systems(a) What is a centrally planned economy?
(b) Outline any four features of a capitalist economy.
Show the model answer
Model answer
(a) A centrally planned (command/socialist) economy is one in which the state owns the main means of production and a central planning authority decides what, how and for whom to produce.
(b) Any four: private ownership of property and means of production; profit motive; price mechanism allocates resources; consumer sovereignty; free enterprise and competition; minimal government interference; unequal distribution of income.
Explanation
Contrast state planning with the market-based features of capitalism.