Answer to Question #331505 in Macroeconomics for bakh

Question

Explain how the fundamental economic problem is addressed in a planned economy and in a

market economy

Answer 1

In its purest form, a market economy answers the three economic questions by allocating resources and goods through markets, where prices are generated. In its purest form, a command economy answers the three economic questions by making allocation decisions centrally by the government.

Planned and market economies blend together in mixed economies.