Answer to Question #139769 in Microeconomics for Alex Robinson

Question

Discuss reasons why only a few countries worldwide practiced the Planned Economic System.

Answer 1

Solution

Most industrial countries have mixed economies, but vary in the degree of government involvement. For example, in Western Europe the government generally has a stronger role, while in North America the market is more influential.

Most of countries are democratic so they have mixed economy.

There are some limitations of planed economy

1. It leads to the destruction of Enturprinur and innovators which in turn leads to lower productivity and also lower growth for a country.
2. This system leads to dissent among the citizens as the basic right of human beings is free will which is challenged under this system and therefore eventually this system may lead to revolution by the citizens of the country against the government.
3. This system suffers from government bureaucracy, delay in decision making on the part of government officials, bottlenecks in production and inefficient use of resources.