Planned Economy

Characteristics/Features

• The government owns and manages all the resources.
• The government determines what to produce, how much to produce and for whom to produce
• The main motive is to provide goods and services rather than profit
• The government sets the prices
• Examples include Cuba, China and North Korea

Advantages

• Prices are kept in control.
• Equitable distribution of wealth.
• Low levels of unemployment as the government provides employment for everyone.
• Elimination of wastage as there is no duplication.
• Provides essential goods.

Disadvantages

• Consumers cannot choose what to buy since there is usually only one brand.
• Takes time to respond to changes in consumer needs and wants.
• Lack of profit motive may lead to inefficiency.

To access more topics go to the Business Studies Notes page.