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Distinguish Between a Centrally Planned Economy and a Market Economy. - Economics

Distinguish Between

Distinguish between a centrally planned economy and a market economy.

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Solution

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.

Concept: Organisation of Economic Activities - The Centrally Planned Economy
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APPEARS IN

NCERT Class 12 Economics Introductory Microeconomics
Chapter 1 Introduction
Exercise | Q 5 | Page 7
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