Which of the following best represents a planned approach, and which best represents a market approach in economic systems?

• A. Resources are allocated based on tradition; government intervenes only in emergencies
• B. Individuals and firms are assigned jobs by the government; prices are determined by a central authority
• C. Firms compete in open markets; government owns all resources and allocates them
• D. Government sets production targets and prices; individuals and firms freely decide what to produce and consume

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the key characteristics of a planned economic system. In a planned economy, the government typically controls resource allocation, sets production targets, and determines prices centrally.
2. Step 2: Understand the key characteristics of a market economic system. In a market economy, individuals and firms make decisions about production and consumption based on market prices, with minimal government intervention.
3. Step 3: Analyze each statement to identify whether it aligns more with a planned or market approach. For example, 'Individuals and firms are assigned jobs by the government; prices are determined by a central authority' clearly reflects a planned economy.
4. Step 4: Identify statements that reflect a market economy, such as 'Resources are allocated based on tradition; government intervenes only in emergencies' or 'Firms compete in open markets,' which emphasize decentralized decision-making and competition.
5. Step 5: Recognize mixed or contradictory statements, such as 'Government sets production targets and prices; individuals and firms freely decide what to produce and consume,' which combine elements of both systems and thus do not represent a pure planned or market approach.