Discuss whether planning has any role to play in the allocation of resources in a modern mixed economic system(12)
ZLA mixed economy comprises of a market economy and a command economy. It has elements of both public and private sectors to ensure the economic growth of a country. Both sectors share the limited resources in the country.
The private sector would mainly produce goods according to the price mechanism as they adopt a profit maximizing behaviour. When the demand for a product is high, the price increase would act as a signal to firms to produce more of the product as they would obtain more profit. Factors that may influence demand of a product to increase includes income, interest rates, price of substitutes. If consumer’s income increases, the demand will increase. However, if interest rates increases, consumers would save more, hence the demand would decrease, producers may then switch to produce other products with higher demand and prices. Public Sector would also be influenced by the change in supply. When cost of production increases, firms tend to spend less on producing that product.