An economy is a system that provides people with goods and services and directly or indirectly satisfies their wants. In this article, you are going to learn about Socialist Economy.
On the basis of ownership over the means of production, economies are classified into the following categories:
- Capitalist economy
- Socialist economy
- Mixed economy
What is Socialist Economy?
It refers to a type of economy wherein all the economic activities are controlled and regulated by a community or government so as to ensure welfare, achievements, and equal opportunities to all the people of the country.
Main features of a socialist economy
- Economic resources are owned by society and are used in the public interest.
- All important decisions are taken by the government.
- Individuals in a socialist economy do not have the right to own private properties.
- The economy is managed and controlled by a ‘Planning Commission’, which is the central authority.
- There is less inequality of income in this economy. Income is distributed among individuals on the basis of their needs and efficiency.
- Price of goods and services is determined by the government.
- Public interest is supreme while taking decisions about production, consumption and investment.
The demand for goods and services arises from human wants. No individual in the whole world can fulfill all his/her wants. Wants are unlimited and means are limited. Thus, this scarcity of means in relation to wants brings forth the economic problem of how many resources should be used in satisfying different wants. In this way, one has to choose a set of wants from among unlimited wants which are to be satisfied with limited resources. Scarcity means a situation where only a limited amount of goods can be produced because of the existence of a limited amount of resources.
Central problems of an economy are the problems faced by and common to all kinds of economic systems (capitalism, socialism, and mixed economy). These include problems with decision-making about what to produce, how to produce, and whom to produce. This is because it is not possible for any economy to produce an unlimited variety of goods with limited resources.