Problems of Centrally Planned Economies
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Discuss the four factors that contributed to the collapse of centrally planned economies.
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Solution Summary
The solution discusses four factors that contributed to the demise of centrally planned economies. The specific factors mentioned are consumer wants, innovations, shortages, and complexity.
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Perry (2011) said that a centrally planned economy without market prices or profits, where property is owned by the state, is a system without an effective incentive mechanism to direct economic activity.
SlideShare Inc. (2011) specifically identified the following factors that contributed to the downfall of centrally planned economy:
1. Consumer wants. Centrally planned economies do not respond to consumer demands. As a result, its citizens are often very dissatisfied with the government's actions.
2. ...
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