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.