Planned Economy and its advantages/disadvantages



Planned economy

  • State ownership and control
  • Consumer preferences is unimportant
  • State decides what to produce
  • E.g. Cuba, North Korea
  • State ownership, control over economic resources

Advantages:

  • Central planning prevents duplication and competition
  • Production based on needs not consumer spending patterns
  • Long term planning

Disadvantages

  • No consumer choice
  • No competition to improve product design and keep prices low.
  • No motivation
  • Slow decision making

 





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