AS A Level Business: Benefits And Drawbacks Of A Planned Economy

• We looked at the features of planned economies here
• We will now examine the advantages and disadvantages of such an economic system
• It is important to note that for the most part:
• The advantages of command economies are usually the disadvantages of free market economies
• The converse is also true, the advantages of free market economies are usually the disadvantages of a command economy

Advantages of command economies

• Unemployment is usually low to none-existant as the government makes sure everyone has a job
• All essential goods and services are produced even if they are unprofitable to make for example merit and public goods are provided sometimes free of charge
• There is no duplication of resources
• There is equitable distribution of wealth
• The government is in charge so they can handle social costs such as pollution
• Prices are kept in control
• Elimination of waste that results from competition among entities providing the same goods/services

Disadvantages

• Consumers have limited choice as there is no brand variety
• Business operations tend to be inefficient as there is no profit motive
• Bureaucracy when it comes to making decisions
• This makes the system inflexible when it comes to anticipating and satisfying consumer needs and wants that are constantly changing
• Encourages corruption as it puts limitless power in the hands of a few bureaucrats

To access more topics go to the Advanced Level Business Studies page

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