Business Economic / Marketing Systems: Evaluation Criteria

Economic Systems
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Economic Systems
How central planning and mixed market economic systems differ
The major difference between the centrally planned economies and the mixed market economy revolves around the autonomic degree of control. In a centrally planned economy, controls of the economy are centrally located/assigned an individual agency charged with the responsibility of controlling production. All businesses come together for the sole purpose of production of goods and services, which are distributed by the government. The advantage of centrally planned economies is that unemployment is low and needs rarely go unfulfilled. The biggest disadvantage of the centrally planned economies is that they are characterized by inefficiencies and the rate of growth is low.
On the other hand, a mixed market economy is a situation in which the government owns just but a few of the production means (Johnson, 2014). The government only steps in a legal capacity to limit, replace or offer regulatory services to private economic interests. Contrary to single domineering socialism in centrally planned economies, mixed market entails both capitalism and socialism. The system is less efficient when compared to capitalism, and more efficient compared to a centrally planned market economy.
Specific problems that exist with central planning that has led to shortages and surpluses for countries employing this system in the past
Due to the government control in centrally planned economies, the markets hardly experience the surplus production of goods and services. However, the controls imposed on a centrally planned economy make it more prone to chronic shortages more often. The centrally planned market also does not have to deal with the issue of unemployment since the government compels everyone to work (Boddewyn, 2015). The main problem that emanates from the controls in a centrally planned economy is the inefficiency in resource distribution, which includes labor distribution. The problem with persistent shortages is further accelerated by the need for determination of how much production has to take place, how much infrastructure to build, the advancement in technology as well as the economic activity to pursue. The problem of the economy also comes about with the need to rationalize the distribution of goods and services to cater for future needs in terms of availability and need. Social control planners do not take into consideration the factors that contribute to the production in terms of costs, thus bases trading on competitive bidding between the customers and the corresponding producers (Johnson, 2014).
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