Distinguish
between a centrally planned economy and a market economy.
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.
|
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. |
