Advantages and Disadvantages of Planned Economy.

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Advantages and Disadvantages of Planned Economy.

Advantages

Disadvantages

* The distribution of wealth is more equal because goods and services can be priced so that everyone can afford them and because no individual can become very rich without making a profit.

* People cannot bring about the production of goods and services through demand.

* Because the state owns all of the factor of production, any 'profit' can be re-distributed so that the people who contribute to the profit can benefit from it.

* Planners may not know consumer wants and may make wrong decisions leading to shortages of some goods and services and surpluses of others.

* Scarce resources can be allocated to the production of necessities like basic foodstuffs and not luxuries.

* Many planners and administration are needed to run the system. It leads to slow decisions, red tape and corruption.

* Factors of production can be organized to produce public goods and merit goods and services like education and health in the quantities the gov't thinks best for the production.

* Because all profits go to the state, people may have few financial incentives to