• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Outline the Main Features of a Centrally Planned Economy. Why have Most C.P.E. Become Mixed Economies and What Problems have they Encountered during this Process?

Extracts from this document...

Introduction

Outline the Main Features of a Centrally Planned Economy. Why have Most C.P.E. Become Mixed Economies and What Problems have they Encountered during this Process? A Centrally Planned Economy is adapted in a state such as the Former Soviet Union where the state owns, operate and be in command of the industries of the country. The government also decided what to produce, how to produce and for whom to produce. The government usually employs all the population and pays for their wages and salaries; they also give them bonuses if they worked efficiently. Furthermore the government offers free services such as healthcare and education. There is also a nationwide equal treatment and distribution of wealth around the population. The government controls all the industries in the country so there will be no private-owned companies which mean that there will be no need for these industries to make a profit, because it is not very important in a centrally planned economy. The government usually offers basic standards of living (not as superior as in the free market economy) ...read more.

Middle

One example is the Sea Port in Jeddah, Saudi Arabia. Furthermore, good and bad quality jobs have the same wages and benefits which de-motivate workers and therefore make them work less efficiently. Technology and innovation does not take place as much as it does in other mixed and free market economies because of the lack of funding towards the capital goods and meanwhile concentrating on the consumer goods on the production possibility curve. Continuing on, recourses in a Centrally Planned Economy are not efficiently used and therefore wasted. Furthermore, the consumers do not have a wide choice of goods to purchase because the government creates all the goods to the consumer therefore there are no exported goods. Moreover people won't spend their money because there is nothing to spend on. In addition, foreign investment is put off because there are no chances for these investments to create any kind of profit. As we progress through the new millennium, more and more countries are moving towards the right on the economics scale. The number of Centrally Planned Economies notably decreased because it is found that it is an inefficient way of governing a country. ...read more.

Conclusion

Firms with an advantage in the market will tend to offer higher prices for its goods and services e.g. Microsoft, which will increase the opportunity cost of the public, with Public and Merit goods underprovided. Because of the changing market and economic climate, booms and slumps periods will take place, with the chances of inflation which will be unpleasant towards the general public. When a country moves to the right, it faces other types of problems. Under a planned economy prices were low, but when it is changed prices increase because the government no longer fixes the prices therefore shortages are created, one reason is that suppliers do not increase their supply on products with high demand (Price Mechanism). Inflation is created because prices shoot up; wages and salaries remain constant so in the end living standards drop. In consequence the currency becomes weaker therefore imports become more expensive. Other serious issues that should be dealt with is to make the public understand the change in the system to survive. Furthermore the new mixed system should cope with entrepreneurs well. Some goods and services that used to be offered by the government for free are no longer free, one such example is education. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Features of command economies

    The size of income is determined by how hard a person has worked and his (her) qualification. The government must exist to supply public goods, maintain a sound currency, provide a legal framework within which markets can operate, and prevent the creation of monopolies in markets.

  2. Free essay

    What are the main characteristics of a free market economy and centrally planned economy?

    because the state decides who works where, and often times, the state attempts to substitute a number of firms with a single firm per market, which will suggest that there is monopoly, and thus, minimal or nil competition. With less competition, there is no desire to improve ones level of

  1. The mixed market economy.

    Like in the Command Economy, the government in the Mixed Market Economy intervenes in the actions of the economy. The government gives goods and services to people who need it. The state redistributes income so that it is not only owners of factors of production, who are able to buy goods and services in the private sector of the market.

  2. Retailing In India - A Government Policy Perspective

    Yet our evidence suggests that they are largely ineffective. In many cases, governments give away substantial sums for investments that would have been made anyway. India, for instance, waived its 35 percent tax on corporate profits for companies that moved back-office processing and IT jobs there-a concession worth roughly $6,000

  1. The Social Balance - The Mixed Economy.

    If we include state spending on financial assets the 1975 figure would be 55%. Whilst these figures do not disprove Galbraith's generalisation - the public sector might still have lagged behind what was desirable - they certainly call it into question.

  2. The Mixed Market and the Command/Planned Economy.

    In the market economy, through risk taking and competition, people have the chance to be become very rich, but this implies that it could have been done at someone's expense; in other words, while the income of the more competitive individual has increased, the other individual that "lost" at the competition has now a lower income.

  1. Assess the relative merits and demerits of a market economy. Why have each East ...

    All other things being equal, consumers will buy from the producer who offers the lowest price. So producers must produce at the lowest price possible and hence in a free market there is productive efficiency-ie a firm will use the factors of production carefully and effectively e.g.

  2. Scarcity and Unlimited Wants.

    In perfect competition there are a large number of small firms in the industry, each producing identical products. Very few markets are perfectly competitive but one example is wheat. In a monopoly one firm supplies 25 per cent or more of a market.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work