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in Economics by (58.2k points)

Explain the meaning of ‘Market Economy’ and ‘Centrally Planned Economy’.

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In a market economy resources are owned privately. The central problems in such an economy are solved by the price mechanism and the objective of production is to earn profit.

In centrally planned economy the resources are owned by the state. All economic activities are planned by the government or a central authority. The objective of production is social welfare.

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