Resource allocation in different economic systems 在不同经济系统的资源分配
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resource allocation in these economic systems
- Evaluate Market Economy
| Market economy | |
|---|---|
| Advantages | Disadvantages |
| Efficiency | Information failure |
| Public goods not provided | |
| Consumer sovereignty | Merit goods under-consumed |
| Demerit goods over-consumed | |
| Quick response | Negative externalities |
| Unemployment | |
| Profit incentive | Factor immobility results in unemployment |
| Market power abuse | |
| Maximizes producer and consumer surplus | Advertising distortion |
| Too many consumer goods | |
| Free of government distortion of market incentives | Poor lack purchasing power |
| Inflation |
- Evaluate Planned Economy
| Planned economy | |
|---|---|
| Advantages | Disadvantages |
| Provision of public goods | No incentives to control costs or better satisfy consumer wants |
| Merit goods encouraged, Demerit goods discouraged | Low competition, low efficiency, low quality |
| Full cost-benefit analysis | Bureaucracy, slow to respond |
| Full employment | Lack of incentive to work hard or innovate |
| Wasteful duplication avoided | Too much of capital goods |
| Vulnerable groups protected | Lack of consumer sovereignty |
Issues of transition from planned to market economy
- Transitional economy: is one which is in process of changing from a planned economy to a mixed economy where market forces have greater importance.
- Issues of transition
- Rising inflation.
- Industrial unrest.
- Fall in output.
- Rising unemployment.
- Large trade deficit.
- Reduction in welfare services.
- Corruption