AS A Level Business: Planned Economy

A planned economy is also known as a command economy
To recap society faces an economic problem of how to allocate its scarce resources
It has to answer three basic questions:
- What to produce
- How to produce and
- For whom to produce?
The task of coming up with solutions to these basic questions often falls upon the government of that particular society
These questions are answered using economic systems
An economic system is also known as an economic order
An economic system can, therefore, be defined as an organized way in which a state or nation allocates its resources and apportions goods and services in the national community
Overtime three economic systems have evolved to become the most prominent
Here we will now examine the planned economic system

It a favoured economic system in countries where governments with socialist/communist ideology are in power
The government owns and manages all the resources i.e Land, Capital and Entrepreneurship are in the hands of the government
The government determines what to produce, how much to produce and for whom to produce
This is usually done by presenting five-year plans to the public for example in China and the old USSR
The government maintains a tight grip on the economy and nothing happens without its go ahead
The main motive is to provide essential goods and services rather than profit
The government sets the prices which are usually affordable and in line with people’s income
There is usually not more than one brand of a given product
Consumers thus have a limited choice from which to pick a product
Examples of countries that have economic systems that lean towards the planned economic system include Cuba, China and North Korea

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

AS A Level Business: Planned Economy- Updated 2024