How is the basic economic problem of scarcity solved in a planned economy?

Answer 1

In a planned economy, the basic economic problem of scarcity is addressed through centralized decision-making by the government or a central authority. This body determines the allocation of resources, production levels, and distribution of goods and services based on societal needs and goals, rather than market forces. By controlling these factors, the government aims to efficiently meet the population's needs and reduce waste. However, this can lead to inefficiencies and a lack of responsiveness to consumer preferences compared to market economies.