Russia and China Economic Transitions Essay Example | Topics and Well Written Essays - 1500 words

Russia and China Economic Transitions - Essay Example The government also makes all the decisions about the use of income and how it will be distributed in the economy. In planned economy, the production, distribution and, most importantly, the pricing and investment decisions are made arbitrarily by the government. It usually employs a fixed price system and a monopoly market structure because all the major economic players are owned and controlled by the government. The proponents of this economic model argue that the government is better placed to know, and hence take care of the particular needs of its people. The free economy occupies the other end of the spectrum; the direct opposite of the planned or controlled economy. Here the economy is based on the division of labor. The prices of goods and services are set by the interaction of the market forces of demand and supply. The intersection of the demand and supply curves provides the optimum price and quantity. The proponents of this model argue that it gives the consumers the lib erty to choose what they want provided and in what quantity. The competitiveness of the market also ensures that the firms in the industry benefit by making reasonable profits that can be sustained by the market. The Mixed economy market is a blend of the planned and the free liberalized economies. It allows the prices to be set by the interaction of the forces of demand and supply but the government reserves the right to control some economic sectors that are too crucial for the country’s development. These sectors include the transport, energy and the health care sectors among others.