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Command Economy-Notes

A command economy is an economic system where the government makes all decisions regarding the production, distribution, and consumption of goods and services, owning and controlling all resources. It aims to ensure fair distribution of essential goods but has characteristics such as centralized planning, lack of private property, and limited consumer choice. Disadvantages include lack of incentives for innovation, inefficient resource allocation, and decreased consumer choice.

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285 views2 pages

Command Economy-Notes

A command economy is an economic system where the government makes all decisions regarding the production, distribution, and consumption of goods and services, owning and controlling all resources. It aims to ensure fair distribution of essential goods but has characteristics such as centralized planning, lack of private property, and limited consumer choice. Disadvantages include lack of incentives for innovation, inefficient resource allocation, and decreased consumer choice.

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Command Economy

An economic system is a way a society organizes the production, distribution, and


consumption of goods and services. A command economy is an economic system in which
the government makes all the economic decisions regarding the production, distribution,
and consumption of goods and services. The government owns and controls all the
resources and means of production and also determines the prices and quantity of goods
and services to be produced and distributed.

In a command economy, the government can ensure that all essential goods and services
are distributed fairly to all citizens, regardless of their income or social status. For instance,
if there is a shortage of food in the market, the government can intervene and distribute
food equally among the population.

Characteristics of a Command Economy

In general, a command economy has the following characteristics:

 Centralized economic planning: The government controls what goods and services
are produced, and how much they cost.

 Lack of private property: There is little to no private ownership of businesses or


property.

 Emphasis on social welfare: The government's main goal is to promote social


welfare and fair distribution of goods, rather than maximizing profits.

 The government controls prices: The government sets the prices of goods and
services, and they remain fixed.

 Limited consumer choice: Citizens have limited options when it comes to purchasing
goods and services.

 No competition: There is no competition between businesses since the government


controls all aspects of the economy.

Disadvantages of a command economy include:

1. Lack of incentives: In a command economy, the government controls all the means
of production and makes all the decisions about what goods and services will be
produced. This can lead to a lack of incentives for innovation and entrepreneurship,
which can hinder economic growth.
2. Inefficient resource allocation: Government interfering with pricing signals can
cause an inefficient allocation of resources

3. Decreased consumer choice: The government decides what goods and services will
be produced and distributed, which may not reflect consumer preferences or needs.

4. Lack of competition: In a command economy, where thegovernment controls all


industries, the benefits of competition are not visible.

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