How is the allocation of goods and services production determined in a command economy?
Businesses decide what to produce on the basis of market conditions.
Consumers decide through their behavior in the marketplace.
Central government planning decides what will be produced.
Supply and demand control production and price.
In a command economy, the allocation of goods and services production is primarily determined by central government planning. The government controls and directs the production and distribution of goods and services according to its overall economic plan and policy objectives. This means that businesses do not have the freedom to independently decide what to produce based on market conditions. Instead, the government decides the types and quantities of goods and services that should be produced, as well as the allocation of resources and factors of production. In this system, supply and demand do not directly control production or prices as they do in a market economy.
In a command economy, the allocation of goods and services production is determined by central government planning. Central authorities and government officials decide what goods and services will be produced, how much will be produced, and who will receive them. This planning is often guided by national economic goals and priorities rather than market conditions or consumer demand.
In contrast to market economies, where businesses determine production based on market conditions, command economies prioritize government control and direction of economic activities. The government plans and coordinates production across various sectors of the economy, such as agriculture, manufacturing, and services, in order to meet the needs of the society as determined by the government.
Under a command economy, supply and demand do not directly control production and prices as they do in market economies. Instead, government planners set production targets and prices for goods and services, taking into account the overall needs of the society and its priorities. This centralized planning system aims to ensure equitable distribution of resources and goods among the population, although it may not always efficiently respond to individual preferences or changing market conditions.
In a command economy, the allocation of goods and services production is primarily determined by central government planning.
Here's how it works:
1. Central government planning: The government decides what goods and services will be produced, how much will be produced, and who will produce them. This is typically done through a centralized planning agency that sets production targets and allocates resources accordingly. The government's decisions are influenced by various factors such as national priorities, social policies, and economic goals.
However, it is important to note that supply and demand still play a role in a command economy, but their impact is often limited. The government may take into account the supply and demand for certain goods and services while making production decisions.
In contrast to the other options you mentioned:
- Businesses deciding what to produce based on market conditions is typical of a market economy or a mixed economy where decisions are largely driven by private sector entities and the forces of supply and demand.
- Consumers deciding through their behavior in the marketplace is again more characteristic of market economies. In command economies, consumer choices are often constrained by limited options available due to government control over production.
- While supply and demand do have some influence in a command economy, they do not control production and prices as they would in a market economy.
So, to summarize, in a command economy, the allocation of goods and services production is primarily determined by central government planning, with limited influence from supply and demand.