Solution to the central problem of an Economy in different economies.

Solution to the central problem of an Economy in different economies.

1-In centrally planned economy:This is the economy in which social welfare is priority of economic agents so all economic decisions are taken by government or its authority.
    a-What to produce- The government produce that good which is highly required by the society thus social welfare is maximised, profit is ignored. 
    b-How to produce-Government uses labour intensive technique if there is unemployment in the economy, if economy is in full employment level then government uses capital intensive technique to ensure to availability of low price goods in the economy.
    c-For whom to produce- No doubt government produce for poor section of the society to maximise social welfare but growth is ignored.

2-In Market economy:  This is the economy in which profit maximisation is the priority of economic agents so all economic decisions are taken by private individuals.
     a-What to produce-Private individuals produce those goods for which demand is high but supply is        less thus profit is maximised.
    b-How to produce-Private individuals choose that technique which increases efficiency and                 decreases the cost of production.
    c-For whom to produce- Private individuals produce for richer section of the society thus profit increases investment increases which leads to GDP growth but poor section is ignored.

3-In Mixed economy:This is the economy in which profit maximisation and social welafre are the priority of economic agents so all economic decision are taken by private individuals and government.
     a-What to produce-Private individuals produce those goods for which demand is high but supply is     low thus profit is maximised but government produces those goods which are highly required by the     society thus social welfare is maximised.
    b-How to produce-Government use that technique which maximise the social welfare may be either capital intensive or labour intensive technique on the other hand private individuals use that technique which reduces the cost and increases the efficiency. 
    c-For whom to produce-Government produces for poorer section of the society and private individuals produce for richer section of the society thus there is a complete balance between                economic growth and social welfare.

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