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Why do centrally planned economies have difficulty meeting consumers need?
Wiki User
∙ 9y ago
In a free-market economy, the various suppliers of goods can increase or decrease production in relation to sales in the marketplace. This means that consumer's needs can be properly taken into account by the suppliers. Conversely, in a centrally planned economy, there is a long time differential between the supply as determined by the government and any changes that the government may make to that supply. As a result, the marketplace cannot adequately take care of consumers' needs.
Additionally, it is not clear that the government will allocate production based on what the consumers actually want to consume. Governments may choose to produce specific products that they wish more members of the populations to have and fewer products that they wish to not be used in society. The amount of product in the market could be set based on bribes and corruption. The amount of product in the market could be based on government interest in companies making the product. There are even cases where the government wants to properly map consumers' needs, but are unable to accurately forecast those needs.
Estell Hayes
Wiki User
∙ 8y agoCentrally planned economies have difficulties balancing industrial, agricultural and consumer needs. This is the result of economists trying to figure out what a free market economy already does. Basically, a nation using central planning only, will not be productive.
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