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Market Economy Vs. Centrally Planned Economy

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Ashley Cano

on 17 October 2013

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Transcript of Market Economy Vs. Centrally Planned Economy

Market Economy Vs. Centrally Planned Economy
Market Economy
Ashley M. Requenes
Period; 2
October 9, 2013
Characteristics of a free Market system
They can set their own prices.
It is free to buy, own, use and sell private property.
They are free to earn profits.
It is free to be an investor.
Consumers are free to choose goods.
Firms are at liberty to select employees.
Examples of a Free Market Economy
United States
United Kingdom
Characteristics of a Centrally Planned Economy
All resources are owned and managed by the government.
There is no consumer or producer sovereignty.
All market resources are not allowed to set prices of goods and services.
Profit is not the main objective.
The government aims to provide goods and services to everyone.
Government decides what to produce and how much of it.
Centrally Planned Economy
Is an Economic system in which economic decisions are made by the state or government. The production of goods and services is undertaken by state owned enterprises.
Is an economy in which decisions regarding investment, production and distribution are based on supply and demand. in which Prices of services and goods are determined in a free price system
Advantages of a Free Market
It responds quickly to peoples wants.
Firms will produce what people want because it is going to bring that firm more revenue.
Larger variety of goods and services.
People have the option to choose what good or service better suits them.
Firms will produce goods and services at lower prices.
Because people have a wider variety to choose from, firms will produce items more efficiently.
Disadvantages of a
Market Economy
Unemployment rates are higher.
Certain goods and services may not be provided because firms are producing only what sells.
Consumption of harmful goods may be encouraged, because firms priority is to profit.
It ignores social cost.
Lower income families are affected because they cannot afford what is always "popular".
Firms use more machines because they are faster and less costly than hiring an employee.
Advantages of a
Centrally Planned Economy
Prices are kept under control.
Everyone can afford to consume goods and services.
Less inequality of wealth.
Lower level of unemployment.
Elimination of waste resulting form competition between firms.
Government aims to provide employment for everyone.
Disadvantages of a
Centrally Planned Economy
Consumers can't choose.
Lack of profit leads to firms being inefficient.
A lot of time and money are wasted in instructions and training from the government.
Government has total control of companies.
Lack of incentives for workers lowers their morale.
Government sets prices of goods and employee wages.
Examples of a Centrally Planned
North Korea
Full transcript