Which statement best describes a command economy?
a. Government cannot intervene in economic choices.
b. The government determines economic choices and makes most of decisions.
c. The decisions made by producers and consumers determine all economic choices.
d. Producers and consumers, and government jointly make economic choices.
This quiz show himself in many places. The statement that best describes a command economy is the government determines economic choices and makes the most decisions(OPTION B). Because the command economy is a structure in which a government primarily decides estates well and resources. So this is why OPTION B is the best ONE.
To further understand this quiz, we must know some basics about command economy. Let’s dive in.
What Is Command Economy
First thing first, what is command economy?
A command economy is the vital aspect of a political system. In this system, a central governmental authority dictates the levels of production about which are permissible and the prices charged for goods and services. Most industries are publicly owned in such system.
The main alternative to a command economy is a free market economy in which demand dictates production and prices instead of government.
Generally, the command economy is a component of a communist political system, while a free market system exists in capitalist societies.
Thus, the OPTION A above saying government intervention in economic choices is definitely a no-no is definitely WRONG. And on the contrary, government intervention is exactly the key in command economy.
Then, OPTION C, the decisions of producers and consumers drive all economic choices, WORNG! We must go back to the definition of command economy, can producers and consumers make decisions? First of all, both of them have no right to make any decisions about the economic choice. The AUTHOTITY makes decisions.
Last one, OPTION D. Producers and consumers, and government jointly make economic choices. Haha, sounds like their rights are fulfilled in different fields. NO. As what I said above, producers and consumers have no right to make any economic decisions, but the government.
Combined with the definition of command economy, we can easily solve the quiz. One we must bear in mind, every procedure including the allocation of planned economic resources, such as what to produce and how much to produce, is all determined by government plans.
Now, let’s see more about command economy and the alternative, market economy.
Difference between Command Economy & Market Economy
What are the differences lying on a command economy and a market economy?
1. The essence of market economy: market entities participate in market economic activities as buyers and sellers, not only between buyers and sellers, but also between buyers and sellers.
2. The essence of the planned economy: The planned economy is developed according to the plans stipulated by the government, and the plans formulated by the government generally have the function of regulating the economy and helping the economy run.
1. Characteristics of a market economy: autonomy, equality, competition, openness and order.
2. The characteristics of the command economy: Emphasizing the high degree of unity between the central and local governments, and taking into account the actual conditions of various places, policies are implemented according to cities. Among them, the plan management is the main one, and the market management is emphasized at the same time.
Different Application Fields:
1. The application field of market economy: social science.
2. The application field of planned economy: economic production.
Disadvantages of Command Economy
1. Easy to deviate from reality and cause unnecessary waste.
2. It is difficult to effectively adjust the contradiction between microeconomic activities and social needs. And it is easy to produce a disconnect between production and demand;
3. Fail to reasonably adjust the economic interest relationship between economic entities. And it will easily lead to insufficient motivation and low efficiency.
4. The formation of privileged and enslaved classes is inevitable. Passive destruction will set restrictions to enterprises, thus the lack of enthusiasm and initiative in production will show up.
5. It is not conducive to promoting technological progress and innovation.
6. It is easy to cause a disconnect between supply and demand, and the proportion of the macro economy is seriously tilting.
The four statements about this quiz show the main difference between command economy and market economy. It seems the differences mainly lies on the economic plans is made or motivated by whom. Bear in mind, command economy is motivated by the government, the visible hand while the market economy is tuned by market, the invisible hand.