Question

note: please hand write your answers on a sheet of paper and upload them to canvas. you may scan them or take a picture. please make sure your writing is legible/readable and your images are clear. alternatively, you may also type your answers however many of the questions require you to use illustrations to make your points. jpg or pdf file format only! i. based on the information posted on canvas, what is the main difference between a centrally - planned economy and free - market economy. provide an example of each using the table above. ii. what incentives are created by both economic systems? iii. suppose an individual can choose to live in either a free - market economy or centrally - planned economy, what aspects would cause the individual to choose one over the other? describe the advantages and disadvantages of both to help you answer the question. table 1.1 economic freedoms, 2016 (source: the heritage foundation, 2016 index of economic freedom, country rankings, http://www.heritage.org/index/ranking) most economic freedom 1. hong kong 2. singapore 3. new zealand 4. switzerland 5. australia 6. canada 7. chile 8. ireland 9. estonia 10. united kingdom 11. united states 12. denmark least economic freedom 167. timor - leste 168. democratic republic of congo 169. argentina 170. equatorial guinea 171. iran 172. republic of congo 173. eritrea 174. turkmenistan 175. zimbabwe 176. venezuela 177. cuba 178. north korea

Explanation:

1. In a centrally - planned economy, the government makes most economic decisions such as production levels, resource allocation, and pricing. For example, in the former Soviet Union, the government decided what goods to produce, how much to produce, and distributed them according to its plans. Incentives are often based on meeting government - set targets.
2. In a free - market economy, decisions are made by the interaction of supply and demand. Firms and individuals make decisions based on profit and self - interest. For example, in the United States, businesses decide what to produce based on consumer demand, and prices are set by market forces. Incentives are profit - driven.
3. The main difference is in decision - making authority. In a centrally - planned economy, it is the government; in a free - market economy, it is the private sector.
4. If an individual can choose to live in either, in a free - market economy, they may have more opportunities for innovation and entrepreneurship due to the profit motive. However, there may be less job security and more income inequality. In a centrally - planned economy, there may be more job security and equal distribution of basic goods, but less incentive for individual initiative as rewards are not as directly tied to individual performance.

Answer:

The main difference between a centrally planned economy and a free - market economy is the decision - making authority. In a centrally planned economy, the government makes most economic decisions, while in a free - market economy, decisions are made by the interaction of supply and demand with firms and individuals making decisions based on profit and self - interest. For an individual, a free - market economy may offer more innovation opportunities but less job security and more inequality, while a centrally - planned economy may offer more job security and equal basic goods distribution but less individual initiative incentive.