Socialistic economy and cash flow diagram

Socialistic economy

A socialistic economy is an economic system in which the main means of production (industries, land, banks, transport) are owned and controlled by the state on behalf of society. A central authority plans what, how much and for whom to produce.

• Aim: social welfare and equitable distribution, not private profit.
• Prices, wages and employment are largely fixed by the state.
• Merits: less inequality, full employment, planned development. Demerits: low incentive and efficiency, bureaucracy, limited consumer choice.

Cash flow diagram

A cash flow diagram is a graphical picture of the cash receipts and payments of a project placed on a time scale. It is the first step in an engineering economy problem.

Conventions:

• A horizontal line shows time, divided into equal periods (years); the numbers mark the end of each period (0 is the present).
• Upward arrows are cash inflows (receipts, benefits); downward arrows are cash outflows (costs), drawn from the viewpoint of one party.
• Arrow length is roughly proportional to the amount; cash flows are assumed at the end of each period.

   Rs 3000  3000  3000  3000
     ^      ^     ^     ^
     |      |     |     |
 ----+------+-----+-----+----> time (years)
 0   1      2     3     4
 |
 v
 Rs 10000 (investment)

Here Rs 10,000 is invested at year 0 and Rs 3,000 is received at the end of years 1 to 4.