InterviewSolution
Saved Bookmarks
InterviewSolution
| 1. |
How are central problem solves in different types of economies? |
| Answer» <html><body><p></p>Solution :The classification of an economy or solution of central problems in different types of economies can be studied under three heads : <br/> <img src="https://d10lpgp6xz60nq.cloudfront.net/physics_images/MIC_ECO_XI_U01_C01_E01_066_S01.png" width="80%"/> <br/>(i) Market Economy. IN a market economy, all economy activities are organised through the market. It is also known as capitalist economy. In a market or capitalist economy, central problems of what, how and for whom to produce are solved by price mechanism i.e., by the prices <a href="https://interviewquestions.tuteehub.com/tag/prevailing-2950879" style="font-weight:bold;" target="_blank" title="Click to know more about PREVAILING">PREVAILING</a> in the market. In this economy, market forces, demand and supply are left free to determine price. Here production is done mainly for earning profits. In this economy, <a href="https://interviewquestions.tuteehub.com/tag/means-1091780" style="font-weight:bold;" target="_blank" title="Click to know more about MEANS">MEANS</a> of production are owned and controlled by the private sector. There is not Govt. interference. <br/> (ii) Centrally <a href="https://interviewquestions.tuteehub.com/tag/planned-1155689" style="font-weight:bold;" target="_blank" title="Click to know more about PLANNED">PLANNED</a> Economy. It is also known as a <a href="https://interviewquestions.tuteehub.com/tag/socialist-1215184" style="font-weight:bold;" target="_blank" title="Click to know more about SOCIALIST">SOCIALIST</a> economy. Here central problems of what, how and for whom to produce are solved through central planning. The Govt. or central authority of the economy plans all the important activities like production, exchange etc. The prices are determined by the planning authority. All decisions are taken with respect to maximize social welfare. <br/> (iii) Mixed Economy. It is mix of public and private sector in the field of production. In this economy important decisions regarding what, how and for whom to produce are taken by Govt. and economic activitis are by and large conducted by the market. All decisions <a href="https://interviewquestions.tuteehub.com/tag/aim-852223" style="font-weight:bold;" target="_blank" title="Click to know more about AIM">AIM</a> to achieve profit maximisation alongwith social welfare. <br/> <img src="https://d10lpgp6xz60nq.cloudfront.net/physics_images/MIC_ECO_XI_U01_C01_E01_066_S02.png" width="80%"/></body></html> | |