Is the problem of coordination common to all economies? Explain how the problem is met in a market economy and how coordination was dealt with in a command economy

Question

Please provide the best answer for the statement.

Answer 1

The problem of coordination is common to all economies. In a market system, prices adjust the quantity demanded to the quantity supplied. For example, if demand increases for a particular resource, its price will rise until the quantity supplied meets the new quantity demanded. If supply decreases, the price will rise until the quantity demanded declines to the level supplied at a new higher price.
In a planned economy, coordination is done through central planning. Such a system was not market-based, and therefore market forces played an insignificant role in decision-making. Various administrative agencies existed to control the plan, and producer and consumer prices were set by central planners to act as rationing devices.