| A market economy easily adjusts to changing demands. | ||
| The government plays an important role in market economies. | |||
| New advanced products and low prices decrease prices. | |||
| Private companies have no stimulus to produce goods. |
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Private firms in market economies try to
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| make a profit | ||
| spend more on products and services | |||
| produce less favoured products | |||
| change demands |
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In what way do changing demands affect production in a market economy?
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| Consumers are ready to pay money for fashionable products, private companies are ready to produce these products to get profits. | ||
| Consumers are ready to get money for fashionable products, private companies are ready to produce these products to get profits. | |||
| Private companies are ready to pay money for fashionable products, consumers are ready to produce these products to get profits. | |||
| Private companies are ready to get money for fashionable products, consumers are ready to produce these products to get profits. |
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| Market economies based on private enterprise with private ownership adjusts to changing demands. | ||
| The private firms are highly competitive in the environment of a market economy. | |||
| In market economies more resourses are available for production because of absence of planners. | |||
| Employers are pay wages to workers according to how skilled the workers are. |
Planned Economies
1. Planned economies are sometimes called command economies because the state commands the use of resources that are used to produce goods and services as it ownsfactories, land and natural resources. Planned economies are economies with a large amount of central planning and direction, when the government takes all the decisions; the government decides production and consumption. Planning of this kind is obviously very difficult and the result is that there is no society, which is completely a command economy. The actual system employed varies from state to state, but command or planned economies have a number of common features.
2. Firstly, the state decides precisely what the nation is to produce. It usually plans five years ahead. It is the intention of the planners that there should be enough goods and services for all. Planners are afraid to produce goods and services unless they are sure substantial amounts will be purchased. This leads to delays and queues for some products.
3. Secondly, industries are asked to comply with these plans and each industry and factory is set a production target to meet. If each factory and farm meets its target, then the state will meet its targets as set out in the five-year plans. You could think of the factory and farm targets to be objectives, which, if met, allow the nation's overall aim to be reached.
4. A major problem faced by command or planned economies is that of deciding what to produce. Command economies tend to be slow when responding to changes in people's tastes and fashions. Planners are likely to underproduce some items as they cannot predict changes in demand. Equally, some products, which consumers regard as obsolete and unattractive, may be overproduced.
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