| Points of Difference | Centrally Planned Economy | Market Economy |
| 1. | Meaning | It is controlled by central authority with the objective of achieving definite targets. | It is controlled by capitalists who aims at
maximising profits. |
| 2. | Ownership of factors of production | Factors of production are publically owned; i.e., public ownership. | Factors of production are privately owned. |
| 3. | Production motive | The motive of production is social welfare. | The main motive is profit making. |
| 4. | Governing factor | The production is governed by planning mechanism; i.e. according to the government plans. | The production is governed by price mechanism; i.e., by demand and supply. |
| 5. | Income distribution | The degree of inequality of income is low. | There exists unequal distribution of income. |
| 6. | Government’s role | The main role is played by the government from production to distribution. | The main role is played by private players. They decide what to produce, while the role of a government is limited to maintaining law and order
in the nation. |
| 7. | Alternative name | It is also known as controlled economy. | It is known as free economy.
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