Differences between Market and Planned Economy

not be produced by market economy system may be provided by a planned economy. These include social, educational and cultural development.Responds quickly to people’s wants. It becomes profitable to produce goods and services that people want and afford to buy. Resources are quickly sent to the market to produce such goods and services. If the goods are not wanted, it becomes unprofitable and resources are directed away into more profitable uses.In planned economy, planners may not know consumers wants and may make wrong decisions leading to shortage of some goods and surpluses of others.The market production may be organized to meet the needs of the rich as producers can probably make larger profit from the production of luxury goods. As a consequence, Necessities for the poor may be neglected such as bread and potatoes. Scarce resources can be allocated to the production of necessities like basic foodstuff and not luxuries.In market, the system is through price mechanism. Makes sure that shortages and surpluses of goods and services do not last for long.Planners may not know consumer wants and may make wrong decision leading to shortages of some goods and services and surpluses of othersIn market, the system may break down because of the development of monopoly situation. A monopolist (a single producer) will be able to determine prices and output because there is no competition.In planned, the gov’t has the power to fix prices and quantities. This means that, where production is controlled by the gov’t will not be changed with higher prices in order to obtain higher profits will not existIn market economy, Economic freedom co-exists with political freedom for consumers. The gov’t keeps out of peoples lives.Market EconomyIn planned, there’s a lack of economics freedom co-exist with a lack of political freedom. The state interfere in almost every aspect of human life.Planned EconomyIn market, people have financial incentive to become productive. If they successfully produce what consumer wish to buy, they can become very rich.In planned, because all profits go to the state, people may have few financial incentives to work efficiently and productively. As result, the quality of goods and services would be low.In market system, there may be unequal distribution of income and wealth. Some people could become very rich and powerful because of their success in business.In planned, 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 by making a profit.In market economy, with no gov’t control in the economy, producers would seek to maximize profit and may pay little attention to pollution, healthy and safe conditions of the workers and quality of goods and services. For e.g. a builder may build houses cheaply to maximize his profit without regard the safety of the people who live in them.The gov’t in planned economy can make sure that factories do not cause pollution and that people work in healthy and safe condition