CA Foundation · Business Economics · Nature and Scope of Business Economics
In a centrally planned economy, the basic economic problems are mainly solved through:
In a centrally planned economy, a central planning authority decides what to produce, how to produce and for whom. The price mechanism, private profit motive and consumer sovereignty are features of a market economy, not of central planning.
- AThe price mechanism responding to demand and supply
- BDecisions of a central planning authorityCorrect
- CProfit decisions of private entrepreneurs only
- DConsumer sovereignty in free markets
Explanation
In a centrally planned (socialist) economy the state's planning authority decides what, how and for whom to produce. Price mechanism and consumer sovereignty characterise a capitalist market economy, and private profit-driven decisions are not the main mechanism in planning.
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