DIFFERENCES BETWEEN CENTRALLY PLANNED AND
MARKET ECONOMIES
THE KEY DIFFERENCE BETWEEN CENTRALLY PLANNED AND MARKET
ECONOMIES IS THE DEGREE OF INDIVIDUAL AUTONOMY.
LEARNING OBJECTIVE
COMPARE THE CHARACTERISTICS OF CAPITALIST AND SOCIALIST
ECONOMIC SYSTEMS
KEY POINTS
• A PURE PLANNED ECONOMY HAS ONE PERSON OR GROUP WHO
CONTROLS WHAT IS PRODUCED; ALL BUSINESSES WORK TOGETHER
TO PRODUCE GOODS AND SERVICES THAT ARE PLANNED AND
DISTRIBUTED BY THE GOVERNMENT.
• PLANNED ECONOMIES HAVE SEVERAL ADVANTAGES. IDEAL LY, THERE
IS NO UNEMPLOYMENT, AND NEEDS NEVER GO UNFULFILLED;
BECAUSE THE GOVERNMENT KNOWS HOW MUCH FOOD, MEDICINE,
AND OTHER GOODS IS NEEDED, IT CAN PRODUCE ENOUGH FOR ALL.
• REALISTICALLY, THESE SYSTEMS TEND TO SUFFER FROM LARGE
INEFFICIENCIES AND ARE OVERALL NOT AS SUCCESSFUL AS OTHER
TYPES OF ECONOMIC SYSTEMS.
• A PURE MARKET ECONOMY IS ONE PERFECTLY FREE OF EXTERNAL
CONTROL. INDIVIDUALS ARE LEFT UP TO THEMSELVES TO DECIDE
, WHAT TO PRODUCE, WHO TO WORK FOR, AND HOW TO GET THE
THINGS THEY NEED.
• BECAUSE THERE IS NO REGULATION ENSURING EQUALITY AND
FAIRNESS, MARKET ECONOMIES ARE BURDENED WITH
UNEMPLOYMENT, AND EVEN THOSE WITH JOBS CAN NEVER BE
CERTAIN THAT THEY WILL MAKE ENOUGH TO PROVIDE FOR ALL OF
THEIR NEEDS.
• BECAUSE THEY DO NOT NEED TO WAIT FOR WORD FROM THE
GOVERNMENT BEFORE CHANGING THEIR OUTPUT, COMPANIES
UNDER MARKET ECONOMIES CAN QUICKLY KEEP UP WITH
FLUCTUATIONS IN THE ECONOMY, TENDING TO BE MORE EFFICIENT
THAN REGULATED MARKETS.
KEY TERMS
CENTRALLY PLANNED ECONOMY
WHEN THE GOVERNMENT IS RESPONSIBLE FOR SETTING THE AMOUNT
PRODUCED.
AUTONOMY
SELF-GOVERNMENT; FREEDOM TO ACT OR FUNCTION INDEPENDENTLY.
MARKET ECONOMY
AN ECONOMY IN WHICH GOODS AND SERVICES ARE EXCHANGED IN A FREE
MARKET, AS OPPOSED TO A STATE-CONTROLLED OR SOCIALIST ECONOMY;
A CAPITALISTIC ECONOMY.
2
MARKET ECONOMIES
THE KEY DIFFERENCE BETWEEN CENTRALLY PLANNED AND MARKET
ECONOMIES IS THE DEGREE OF INDIVIDUAL AUTONOMY.
LEARNING OBJECTIVE
COMPARE THE CHARACTERISTICS OF CAPITALIST AND SOCIALIST
ECONOMIC SYSTEMS
KEY POINTS
• A PURE PLANNED ECONOMY HAS ONE PERSON OR GROUP WHO
CONTROLS WHAT IS PRODUCED; ALL BUSINESSES WORK TOGETHER
TO PRODUCE GOODS AND SERVICES THAT ARE PLANNED AND
DISTRIBUTED BY THE GOVERNMENT.
• PLANNED ECONOMIES HAVE SEVERAL ADVANTAGES. IDEAL LY, THERE
IS NO UNEMPLOYMENT, AND NEEDS NEVER GO UNFULFILLED;
BECAUSE THE GOVERNMENT KNOWS HOW MUCH FOOD, MEDICINE,
AND OTHER GOODS IS NEEDED, IT CAN PRODUCE ENOUGH FOR ALL.
• REALISTICALLY, THESE SYSTEMS TEND TO SUFFER FROM LARGE
INEFFICIENCIES AND ARE OVERALL NOT AS SUCCESSFUL AS OTHER
TYPES OF ECONOMIC SYSTEMS.
• A PURE MARKET ECONOMY IS ONE PERFECTLY FREE OF EXTERNAL
CONTROL. INDIVIDUALS ARE LEFT UP TO THEMSELVES TO DECIDE
, WHAT TO PRODUCE, WHO TO WORK FOR, AND HOW TO GET THE
THINGS THEY NEED.
• BECAUSE THERE IS NO REGULATION ENSURING EQUALITY AND
FAIRNESS, MARKET ECONOMIES ARE BURDENED WITH
UNEMPLOYMENT, AND EVEN THOSE WITH JOBS CAN NEVER BE
CERTAIN THAT THEY WILL MAKE ENOUGH TO PROVIDE FOR ALL OF
THEIR NEEDS.
• BECAUSE THEY DO NOT NEED TO WAIT FOR WORD FROM THE
GOVERNMENT BEFORE CHANGING THEIR OUTPUT, COMPANIES
UNDER MARKET ECONOMIES CAN QUICKLY KEEP UP WITH
FLUCTUATIONS IN THE ECONOMY, TENDING TO BE MORE EFFICIENT
THAN REGULATED MARKETS.
KEY TERMS
CENTRALLY PLANNED ECONOMY
WHEN THE GOVERNMENT IS RESPONSIBLE FOR SETTING THE AMOUNT
PRODUCED.
AUTONOMY
SELF-GOVERNMENT; FREEDOM TO ACT OR FUNCTION INDEPENDENTLY.
MARKET ECONOMY
AN ECONOMY IN WHICH GOODS AND SERVICES ARE EXCHANGED IN A FREE
MARKET, AS OPPOSED TO A STATE-CONTROLLED OR SOCIALIST ECONOMY;
A CAPITALISTIC ECONOMY.
2
