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Command Economy System

Definition

A command economy system is an economic structure where the government controls and regulates production, distribution, and prices. They decide what goods should be produced, how much should be produced, and the price at which the goods will be offered for sale.

Analogy

Think of a command economy like a school cafeteria. The school (government) decides what food (goods) will be served each day, how much of each item to prepare (production), and at what price students can buy them (prices). Students don't have control over these decisions; they just consume what's available.

Related terms

Market Economy: An economic system in which production and prices are determined by unrestricted competition between privately owned businesses.

Mixed Economy: An economic system combining private and public enterprise. It includes both capitalist and socialist economic policies.

Central Planning: The process by which the government makes all decisions about the production and allocation of goods and services in a command economy.