Comparison between Market Economy

and Centrally-Planned Economy

• Market economy , also called Capitalist economy

and Centrally planned economy occupy two polar
extremes in the organization of economic activity
Market Economy
• The activity is unplanned,
people determine what to
produce, what to sell, where to
produce,how much to produce.
• If people don´t want to buy an
item for a certain price they
can refuse to do so and if
enough people make the same
choice, then businesses will
have to sell that item at a price
which people are willing to pay.
Centrally Planned
• The state or governement
makes decisions.They own all:
land, capital and resources
and tey determine when,
where and how much is
produced at any time.
• Prices don´t arise naturally
through supply and demand
as the government
determines the supply and
sets the demand.
Market Economy
• Profits determine resource allocation
• There is no regulation ensuring
equality and fairness and they are
burdened with unemployment and
even those with jobs can never be
certainthat they will make enough to
provide for all of their needs.
• Doesn´ t need to wait for word from
the governemnt before changing the
output, citizens can have more
freedom and opportunities to do the
jobs they want and to profit by them.
Centrally Planned Economy
• Political factors determine
resource allocation.
• Personal options are non
existent but there is no
unemployment and needs never
go unfulfilled because the
government knows how much
food, medicine etc is needed.
• Government can force citizens to
pay taxes and decide how many
roads or hospitals are built.