Centrally planned economy is defined as an economic system whereby economic factors are fixed by central authorities namely the states and the government of a respective nation. Such system is as opposed to one where decisions are made by private residents and companies, specifically the market economic system. Centrally planned economy approaches toward an assumption in which the market does not revolve around the utmost interest of the people, and that central power decisions are required in order to facilitate the community and country objectives. For instance, prices of goods and services and quantity of production are examples of economic decisions determined by the states. Such verdict made would enable the government to have easier focus of labours and resources on industrial projects without needing to wait for private business investment. Due to the characteristic of control in price and production, consumers' demand and producers' supply become predictable and controllable. Furthermore, not only does the government possess and manage all resources available, they too, decide on whom and what goods to manufacture. While profit maximization is considered vital in the principle of economics, it is not the primary intention of the centrally planned economy. The ultimate goal of this plan however, is to provide adequate and equal goods and services to the people. Majority of the countries that practiced above mentioned system have eventually revolutionized onto a different economy plan. For example, China, a country that once pursued said plan in the year of 1949, had terminated this system in 1979 due to various economic failure.
One of the many benefits of centrally planned economy involves the lower rate of inequality in wealth and prosperity. Money and income is distributed more evenly because the price of goods and services can be implemented in such a way that people are able to afford them. Due to the fact that the states are in...
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