Market Economy Compared to Planned Economy in Terms of Allocating Scarce Resources

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Market economy compared to planned economy in terms of allocating scarce resources

By:
Habab Mohamed

In the purpose of allocating the resources of a certain country, controlling the market flow, adjusting and making the rules and policies to manage the market in addition to the pricing of goods in terms of maintaining an efficient economy growth of a certain country, economists have been struggling to answer the very questioning issue; what is the most effective economy system in terms of allocating scarce resources? Market economy or planned economy. In the debate of which is more effective in terms of allocating scarce resources, since in the two last decades the planned economies have introduced elements of the market mechanism into their economic system, the following paragraphs will briefly define the classifications of economy systems, determine the advantages and disadvantages of Market economy and compare it to the planned economy in terms of allocating scarce resources. Market economy as economists define it, is the economy system in which the country’s economic decisions and all the assumption of market forces such as demand, supply and pricing of goods are the best determinant of what is good for the nation and the country as well. Governments in Market system have a little intervention or central planning, only to the extent that it’s needed to provide stability. All resources in Market economy are owned by people or firms, as a result they only and alone decide what to produce, how much they produce and to what market. When profit is the only and alone reason and motives for all business, demand and supply of goods and services play the main role as a pricing mechanism, which gives the consumer the freedom to choose within a variety of products. People in Market economy countries improve their technical skills and get more knowledge in their professions according to the high competition environment, trying to make more profit or at least...
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