Goal: Understand Command
Economies 10-4-11
Command Economy-is an economic system in which the
government makes all economic decisions.
-In command economies the government decides the
answers to the three economic questions:
-What will be produced?
-How it will be produced?
-For whom are we producing for?
-The wants of individual consumers are rarely considered
-All decisions in a Command Economy are made by a
Central Planning Authority
Central Planning Authority-is a group of government
officials that make all the economic decisions in a
command economy
Types of Command Economies
Socialism-is an economic system in which the
government owns some or all of the factors of
production.
-can be democratic, meaning society votes for the
government officials they want in control of making the
Command Economies Per 8 Page 1
government officials they want in control of making the
economic decisions
Example: Sweden, Venezuela
Communism- is a economic system in which the
government owns all the factors of production and there
is little or no political freedom.
-more extreme form of socialism
-no private ownership of property
-usually involves an authoritarian government, meaning a
dictator takes over power violently
Examples: North Korea and Cuba
Advantages of Command Economies
-provide for everyone, even the sick and elderly who are
not working
-attempt to treat everyone equally
-produce certain items that might not make money in a
market system
Disadvantages of Command Economies
-government has little understanding of what is going on
in local communities
-therefore the government's decisions are misguided or
wrong
-workers have no motivation to become more productive
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-workers have no motivation to become more productive
since they are paid the same regardless of output
-government usually sets prices too low, creating
shortages
-going against government can result in jail time or even
death
Exit Question: Name one difference between socialism
and communism?
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