Central Planning vs. Market System (Ch 1)

Central Planning vs. Market System (Ch 1)

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

2. 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)

3. 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)