Disadvantages Of Planned Economy

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Question 1

a (i) A collectivist economy is also known as a command economy. The collectivist economy is an economy where there is government intervention in terms of policy making.

ii. The two other examples of collectivist economies are communist and bureaucratic economies of USSR, Russia and Ujamaa economy of Tanzania. Communism is also applicable in the republic of Cuba. Collectivist economies encourage interdependence among citizens of a nation. There is governmental control

The per capita income for South Korea is also higher in relation to the respective factor of North Korea. For instance, for 2011, the PPP for South Korea is $31, 700 and for North Korea is $1, 800. The industrial sector forms the largest component of the economy in relation to other sectors like agriculture and services. The services sector is the largest component in the economy of South Korea. It is comparatively bigger than sectors like agriculture and industry. The number of people in the labor force is a high of 25.18 in South Korea, while in North Korea it is a figure of 12.2 million people. This means the unemployment rate is relatively low in South Korea as compared to that of North Korea. This implies that the free economy allows people to innovatively engage in productive activities in order to earn a living. The occupation of service sectors is high in South Korea. There is a budget deficit of $0.1 billion in North Korea. The economy of South Korea has a surplus budget of 2% of the total GDP .The overall economic performance of South Korea is improving. There are positive economic indicators in terms of real GDP and the sectored composition of the aggregate GDP (Korea Economic Institute, 2008).

A collectivist economy is characterized by government intervention. The low quality goods do survive in a collectivist economy as the government intervention will enable the economy to sell

The manufacturing of essential goods is efficiently managed in a planned economy. There is Pareto efficiency in the provision of essential commodities in the planned economy. The right quantity of goods is availed and fair prices are charged for the buyers and citizens of the country. Another advantage is the protection of infant and young industries. This is through the provision of subsidies and quotas. The setting of standards of goods ensures safety of goods being consumed by the