Centrally planned economy

A centrally planned economy is an economy in which all the important choices in an economy is centrally decided by the government or an administration within the government. In a planned economy, the government make the decisions of what to be produced, how it is produced and how the production results will be distributed.

A centrally planned economy is the opposite to a market economy. A planned economy is more rigid compared to a market economy and a planned economy means that competition is limited. With the lack of competition there is limited improvements in production, limited improvements in products and a lack of price cuts.