2. An economic system refers to the way in
which the resources of a country are
used to produce goods and services,
and the manner in which these goods
and services are distributed for
consumption.
3. A Centrally Controlled Economy in
which business activities and the
allocation of resources are
determined by the government
rather than market forces, also called
Planned Economy.
4. A political system
characterized by a
centrally planned
economy with all
economic and political
power resting in the hands
of the government.
Communist governments
are authoritarian in nature.
COMMUNISM
A social and political
philosophy based on the
belief that democratic
means should be used to
distribute wealth evenly
throughout a society.
SOCIALISM
5. Determined by
by Government preferences
Determined by
Government and their
Employees
Determined by
Government preferences
WHAT
to produce
HOW
to produce
FOR
WHOM
to produce
6. • Prices are kept under control and thus everybody can
afford to consume goods and services.
• There is less inequality of wealth.
• There is no duplication as the allocation of resources is
centrally planned.
• Low level of unemployment as the government aims to
provide employment to everybody.
• Elimination of waste resulting from competition
between firms.
7. • Consumers cannot choose and only those goods
and services are produced which are decided
by the government.
• Lack of profit motive may lead to firms being
inefficient.
• Lot of time and money is wasted in
communicating instructions from the
government to the firms.
