Cambridge AS A Level Business Studies/ ZIMSEC Advanced Level Business Studies/ Business Enterprise Skills Notes: Planned/Command Economy: Features 

  • 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

Characteristics/Features

  • 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
  • The advantages and disadvantages of the Planned Economy can be found here

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

To access more topics go to the ZIMSEC Business Enterprise and Skills page

To access more topics go to the Cambridge AS A Level Business Studies page

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