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CA Foundation · Business Economics · Nature and Scope of Business Economics

In a centrally planned economy, the basic economic problems of what, how and for whom to produce are primarily solved by:

In a centrally planned economy, a central planning authority of the government decides what, how and for whom to produce. Unlike a market economy, where prices and profit motives guide decisions, allocation here is determined by state plans and targets.

  1. AThe price mechanism operating through free markets
  2. BA central planning authority of the governmentCorrect
  3. CConsumer sovereignty alone
  4. DProfit motives of private entrepreneurs

Explanation

In a centrally planned (socialist) economy, the government's central planning authority decides resource allocation and output. In a capitalist economy the price mechanism and profit motive do this work. Hence the central authority is the correct answer.

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