ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When markets or governments make economic decisions about what goods and services their resources will be used to make, what basic economic question are they answering? What to produce?

Detailed explanation-2: -A centrally planned economy, also known as a command economy, is an economic system where a government body makes economic decisions regarding the production and distribution of goods.

Detailed explanation-3: -In a socialist society the government decides what goods are to be produced in accordance with the needs of society. It is assumed that the government knows what is good for the people of the country and so the desires of individual consumers are not given much importance.

Detailed explanation-4: -A market economy is an economy in which the decisions of households and firms interacting in markets allocate economic resources. The United States, Canada, Western Europe, and Japan all have market economies. Privately owned firms must produce and sell goods and services that consumers want to stay in business.

Detailed explanation-5: -In a centrally planned economy the central government makes all decisions about the production and consumption of goods and services. In a market economy economic decisions are made by individuals and are based on exchange, or trade.