fincash logo SOLUTIONS

Fincash » Centrally Planned Economy

Centrally Planned Economy

Updated on May 15, 2024 , 11083 views

What is the Centrally Planned Economy?

Also known as a command Economy, the centrally planned economy is where the economic decisions regarding the Manufacturing and the distribution take place. They are different from Market Economics. The command economy does not rely on the laws of supply and demand that operate in the market.

Centrally Planned Economy

In recent years, many centrally-planned economies started to add aspects of the market economy which leads to achieving better goals.

Five Characteristics of Centrally Planned Economy

  • The government sets a five-year central economic plan and societal goals for every sector and region in the country. Shorter-term plan convert the goals into actionable objectives.
  • The central plan sets the priorities or the production of all goods and services, which includes the quotas and price manipulation. The goal is to supply ample food, housing and other basic necessities to everyone in the country. Apart from this, it also includes mobilizing for war or generating strong Economic Growth.
  • The government assigns all the resources as per the central plan. It essays to use the nation’s Capital, natural resources and labour Efficiency. It seeks to eliminate unemployment.
  • The government creates laws, regulation and directives impose the central plan. The business follows the plan’s production and hiring targets where they can’t respond on their own to free-market forces.
  • The government own a monopoly business where these

Ready to Invest?
Talk to our investment specialist
By submitting this form I authorize to call/SMS/email me about its products and I accept the terms of Privacy Policy and Terms & Conditions.


  • It can manipulate large amounts of resources for large projects without any lawsuits or environmental regulatory issues.
  • A society can be transformed to adapt the government’s vision from nationalizing companies to placing workers in new jobs after a governmental skill assessment.
  • It helps to mitigate harm caused by certain activities or encourage activities that have positive effects.


  • A rapid change can completely avoid the society’s needs, which forces the development of the Black Market.
  • The production of goods is not always matched to demand and poor planning, which leads to Rationing.

All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
How helpful was this page ?
Rated 3, based on 1 reviews.