In a socialist economy the basic economic problems are solved through plan­ning. The government appoints a Central -Planning Authority which makes economic decisions.

(i) The decision of what to produce and in what quantities is carried out on the basis of national priorities.

(ii) In a socialist economy the main objective is to ensure full utilization of resources. Therefore planning authority keeps this objective in mind while choosing a technique of production.

(iii) Production is controlled by the government. It is distributed in an equi­table manner in order to satisfy the basic needs of all consumers.