What is a command or planned economy?
Skip to content. A command or planned economy occurs when the government controls all major aspects of the economy and economic production. In a command economy, it is the government that decides what to produce, how to produce goods and how to distribute goods and services within the economy.
What is the role of government in a command economy?
In a command economy, it is the government that decides what to produce, how to produce goods and how to distribute goods and services within the economy. Command economies were often associated with the political system of Communism.
What is a command economy AP Gov 2017?
April 28, 2017. A command or planned economy occurs when the government controls all major aspects of the economy and economic production. In a command economy, it is the government that decides what to produce, how to produce goods and how to distribute goods and services within the economy.
What is the bottom line of a command economy?
The Bottom Line. A command economy does not allow market forces like supply and demand to determine what, how much, and at what price they should produce goods and services. Instead, a central government plans, organizes, and controls all economic activities, discouraging market competition.
How do command economies make decisions?
In a command economy, the decision is dictated by government. Few free-market economies today operate entirely on the principle of laissez-faire. A government may use public policies and regulations to encourage the production of a product, such as fuel-efficient cars.
How are economic decisions made in a command economy quizlet?
How are economic decisions made in a command economy? The government decides what goods and services will be produced, how they will be produced, and how they will be distributed.
Who makes the decisions in a command economic system?
A command economy is where a central government makes all economic decisions. Either the government or a collective owns the land and the means of production. It doesn't rely on the laws of supply and demand that operate in a market economy. A command economy also ignores the customs that guide a traditional economy.
Who makes the decisions in a command economy quizlet?
A command economy is an economic system in which the government controls the means of production, such as land, labor, and machinery. Government planners, not private individuals, make the economic decisions in a command economy.
How does a command economy work quizlet?
an economy in which production, investment, prices, and incomes are determined by the government. Free Enterprise is an economic system in which the prices for goods and services are set freely and competitively by owners and consumers.
How does a command economy answer the 3 questions?
In its purest form, a market economy answers the three economic questions by allocating resources and goods through markets, where prices are generated. In its purest form, a command economy answers the three economic questions by making allocation decisions centrally by the government.
What are the decision-making units of an economy?
In an economy, production, consumption and exchange are carried out by three basic economic units: the firm, the household, and the government. Firms make production decisions.
What are the main features of a command economy?
A command economy has a small number of typical elements: A central economic plan, government ownership of the means of production, and (supposed) social equality are essential features of a command economy.
What is a command economy example?
A command economy is run with a central plan in mind. This is a central economic objective which is the aim for allocating resources and production. Examples of a command economy include the likes of China, North Korea, Cuba, Russia, and Vietnam.
What is command economy economics quizlet?
command economy- An economic system in which the government controls a country's economy. market economy- an economy that relies chiefly on market forces to allocate goods and resources and to determine prices.
What is command economic system?
command economy, economic system in which the means of production are publicly owned and economic activity is controlled by a central authority that assigns quantitative production goals and allots raw materials to productive enterprises.
What would happen if a command economy was created?
Command economies could produce goods which benefit society and ensure everyone has access to basic necessities.
What is the government's role in command economy?
In a command economy, it is the government that decides what to produce, how to produce goods and how to distribute goods and services within the economy. Command economies were often associated with the political system of Communism.
Why do people support command economies?
Supporters of command economies argue that it enables the government to overcome market failure, inequality and create a society that maximises social welfare rather than maximises profit.
What is the government's macroeconomic objective?
Government macro-economic objectives. In a command economy, the government will have over-riding macroeconomic objectives such as employment rates and what to produce. Some centrally planned economies may consist of not just state-owned enterprises, but some privately owned firms who are closely directed by state management.
What was the transition to a mixed economy?
From the 1980s, many command economies, such as the Soviet Union began to make the transition to a mixed economy. This involved a process of privatisation and price deregulation. A mixed economy enables the benefits of both free market and some selected government intervention.
What is the threat of command economy?
Threat to democracy and liberty. A command economy creates a very powerful government which limits individuals rights to pursue economic objectives. This invariably creates a climate where governments can extend their control into other areas of people’s lives. Bureaucratic.
What is centralization in government?
Centralisation means that decisions are taken by people who may have no access to what is actually happening. Command economies, like the Soviet Union, often produced goods that weren’t used.
How A Command Economy Works
- Government ownership of the means of production. In command economies, governments will own some or all of the industries producing goods and services.
- Government pricing and production decisions. In a command economy, production is decided by government agencies, who decide the most socially efficient goods to produce. Government agencies may als...
- Government ownership of the means of production. In command economies, governments will own some or all of the industries producing goods and services.
- Government pricing and production decisions. In a command economy, production is decided by government agencies, who decide the most socially efficient goods to produce. Government agencies may als...
- Government macro-economic objectives. In a command economy, the government will have over-riding macroeconomic objectives such as employment rates and what to produce.
- Some centrally planned economies may consist of not just state-owned enterprises, but some privately owned firms who are closely directed by state management.
Advantages of Command Economies
- Supporters of command economies argue that it enables the government to overcome market failure, inequality and create a society that maximises social welfare rather than maximises profit.
- Command economies can prevent abuse of monopoly power.
- Command economies can prevent mass unemployment, often a feature of capitalist econom…
- Supporters of command economies argue that it enables the government to overcome market failure, inequality and create a society that maximises social welfare rather than maximises profit.
- Command economies can prevent abuse of monopoly power.
- Command economies can prevent mass unemployment, often a feature of capitalist economies.
- Command economies could produce goods which benefit society and ensure everyone has access to basic necessities.
Disadvantages of Command Economies
- Government agencies usually have poor information about what to produce. Centralisation means that decisions are taken by people who may have no access to what is actually happening. Command econom...
- Unable to respond to consumer preferences.
- Inefficient firms are protected and kept going; making it hard for resources to move to dyna…
- Government agencies usually have poor information about what to produce. Centralisation means that decisions are taken by people who may have no access to what is actually happening. Command econom...
- Unable to respond to consumer preferences.
- Inefficient firms are protected and kept going; making it hard for resources to move to dynamic and efficient firms.
- Threat to democracy and liberty. A command economy creates a very powerful government which limits individuals rights to pursue economic objectives. This invariably creates a climate where governme...
Transition from Command to Market Economies
- From the 1980s, many command economies, such as the Soviet Union began to make the transition to a mixed economy. This involved a process of privatisation and price deregulation. A mixed economy enables the benefits of both free market and some selected government intervention. China has also made the transition from a command economy to a mixed econom…