Question

In 2 or 3 sentences, explain what determines the allocation of resources and distribution of goods in a market economy versus a planned economy.

Answer 1

Answer:

Explanation:

In a market economy, resource allocation is determined by the supply and demand forces. In other words, the allocation of resources is decided using the price  mechanism.

The resource allocation in a planned economy, on the other hand, is determined by a government or a central authority. In other words, the central authority decides the quantity to be produced, the method of production, and the target consumer to whom the production is targeted.