Market Economy Vs Planned Economy
Market economy Vs planned economy both are two different economy systems. An economic system is a set of institutional arrangements whose function is to employ most efficient scarce resources to meet the ends of society. Both the economic systems have to answer the basic questions of economy i.e. what to produce, (most wanted goods by the people), how much to produce (whether to produce small quantity at small scale or bulk production at large scale), how to produce (choosing techniques of production labour intensive or capital intensive) and for whom to produce (which group or class of society gets larger share).
Market economy operates through free working of demand and supply forces. Therefore, it is the price mechanism, which decides the allocation of resources. Price works as a signal in a market economy where consumers are sovereign, free labour and free enterprise is allowed. Most of the ownership rests with the private owners. Profit functions as incentive and motivating force in the economy where competition and combination is highly appreciated. Whatever development we see in the west is result of free working of market economy where government interference is minimum.
The problem with the economic system is that it is not always working at efficiency and moreover, results in inequitable distribution of wealth and resources. Due to cutthroat competition resources are wasted. The proletariat class is exploited by bourgeois class. The market is always fluctuating and haunted by trade cycles, unemployment and inflation.