Command Economy


- The government has to ability to end a market failure

- abuse of monopoly can be prevented by command economies

- Unemployment tends to be lower in command economies

- A good command economy makes sure that every citizen has basic needs.


- Even under ideal circumstances, providing adequate goods for everyone is difficult

- Does not concern itself with consumer preferences

- In some ways this economy can become a way for governments to directly control people's lives.

Examples of Command Economies:

- China

- Cuba

- North Korea

- Soviet

Three Economic Questions

What will be produced?

Production is completely controlled, whenever an item is needed, The governmment tells producers to make it. Sometimes, production companies are given quotas.

How are the goods to be produced?

After the government chooses what to make, companies are allotted raw materials and an amount of product to make. After the product is made, planners in the government decide the price they want to set and the method of distribution.

For whom are the goods produced?

Goods are produced for the government and its people. In a command economy market the amount one has is determined by their wealth. Because wage is set by the government, they are indirectly effecting how much consumers can consume.

Comment Stream