In which type of economy does the state determine how much to produce and for whom to produce?

In a planned economy, also known as a command economy, the state or government plays a central role in making decisions regarding the production of goods and services. This includes determining the amount of goods to produce and deciding for whom these goods should be produced. The government regulates all aspects of economic activity, aiming to allocate resources according to a national plan rather than relying on the forces of supply and demand.

In this type of economy, the absence of market signals means that pricing and output decisions are made through central planning rather than individual consumer choices or competition between producers. The intent is often to achieve specific social or economic goals, such as equity or full employment.

Contrastingly, in a free market economy, decisions about production and consumption are driven by individual consumers and producers in a decentralized manner, based on supply and demand dynamics. A transition economy refers to economies shifting from a planned system towards a more market-oriented approach, whereas a mixed economy incorporates elements of both free market and planned systems, where some industries may be state-controlled while others operate in a competitive market.