r Meyer and Ahlert (2019), the price mechanism, potentially in the pure market economy, works based on price elasticity which generates according to fluctuation in the goods’ demands. As the demand for goods gets raised in this type of market, the price rate also tends to get increased simultaneously. Moreover, while the demand gets decreased, the price rate also gets decreased so as to increase the sales anyhow by creating a sense of cost reduction. In addition to this, the price mechanism in the pure market economy also helps in organising the production of products and goods. Further, the price mechanism would also help in distributing the developed goods in the market, which would further help in enhancing the economy of the country. The price mechanism would also help in resolving the issues related to the production of the goods and services as well as helps in defining the quantity of the products to be developed (Meyer and Ahlert, 2019).

Section 3: Centrally Planned Economy

Section 3.1 Introduction

Hare (2013) reviewed that a Centrally Planned Economy (CPE) is an economic system where the state of the government plays a chief role in making economic decisions. The involvement of the customers and business enterprises is not identified in the decision-making process in a CPE. The business enterprise owned by the state is responsible for undertaking the production of demanded commodities and services (Hare, 2013).

Section 3.2: How a Centrally Planned Economy Deals with Scarcity and Choice

Hall and Lieberman (2012) argued that in a CPE, the scenario of scarcity is dealt with the help of resource allocations by the government.

Resources allocation by the government plays a key role in identifying the demands of the individuals residing in a given region by considering the equity levels. The government allocates limited resources in the regions that are facing scarcity by means of non-pricing mechanisms like queuing and rationing coupons. The suppliers and customers do not have a choice over accessing the respective commodity. The power of choice vests with the state-held enterprises, which allocate resources on an equal basis by determining the demands (Hall and Lieberman,