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Central Planning vs. Market System
(Ch 1)
- Central planning:
- Centralized, means of
production owned by the
government, difficult to obtain
information that would be
captured by prices, ex: North
Korea, Soviet Union
- Centralized, means of
production owned by the
government, difficult to obtain
information that would be
captured by prices, ex: North
Korea, Soviet Union
- Market System
- decentralized,
individuals and
families own the
means of production;
prices serve as
signals that provide
information
- market economies are usually
more efficient (productive &
allocative efficiency)
- market economies are usually
more efficient (productive &
allocative efficiency)
- decentralized,
individuals and
families own the
means of production;
prices serve as
signals that provide
information
- Mixed Economies
- mix of centrally planned &
market economies,
continuum, some countries
are more centralized,
command, and control (ex:
China) and other more Price
(South Korea); countries can
change how much CCC vs.
how much price system
over time (ex: USA)
- mix of centrally planned &
market economies,
continuum, some countries
are more centralized,
command, and control (ex:
China) and other more Price
(South Korea); countries can
change how much CCC vs.
how much price system
over time (ex: USA)
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