Answer to Question #243537 in Microeconomics for Geraldine

Question

a)    Discuss Free Market Economic Model and Centrally Planned Model as economic systems for resource allocation and their implications on housing.

b)    Provide local and international examples (best practices) where these systems are applied.

 

Answer 1

In the Free Market Economic Model, free competition determines prices, thus, the demand and supply determines investment decisions, distribution, and production, which influences the resource allocation. In a Centrally Planned Model, also called a command economy is where the allocation of resources and prices are determined by the central government and not autonomous as seen in the former model. In this economy, the government makes decisions on how investments should take place instead of business and consumers