Unit 1: Economic Systems, Command Economy (SSEF4)
**Class Copy
Command System
A command economy is sometimes called a planned economy,
because decisions are made by a central authority that works to fulfill
an economic “plan.” The interest of “the plan” precedes the private
interests of the people. A central authority makes decisions about
what to produce, how to produce, and how to allocate the benefits of
production. Both the allocation of resources and the distribution of
goods and services are determined by a central authority, acting to
fulfill “the plan.” In a typical planned system, all resources, goods and
services are owned by everyone (i.e. by the government) and
controlled by a central authority. In communism, the central
authority tends to be totalitarian; in socialism, the central authority
may be a freely elected government or its representatives.
Modern day examples of command economies:
1.
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North Korea
government: Communist state
economic system: probably the most centrally-planned system in the world today
economically isolated and desperate
limited international trade
although there is substantial investment into nuclear arms technology, most of the people live in severe poverty,
surviving on food received from international aid programs
2. China
- government: Communist state
- economic system: a centrally-planned system, which began pursuing market based development in the late1970s
- resources are not collectivized, but left for local authorities to manage
- small-scale enterprise is allowed
- large annual foreign investment
- since privatization, government industries have struggled to compete with private enterprise
- now the second-largest economy in the world, although the income per capita is still very small
3.
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Cuba
government: Communist state
economic system: a command system, with some private enterprise allowed
political command is reinforced with cultural isolation; private individuals cannot access the Internet without
permission, but may freely access the state-sponsored “intranet”
about three-quarters of the labor force works in the state sector, one-fourth in the private sector
**Class Copy
Part 1: Below is a list of characteristics of economic systems. For each characteristic, write
on a separate sheet of paper whether it is true of a “Market,” “Command,” or “Mixed”
system. Some items will be true of more than one type of economic system. Be sure to list
all that apply.
1. __________________ a central authority makes all decisions
2. __________________ the vulnerable have no protection
3. __________________ resources are allocated at the determination of a central authority
4. __________________ resources are allocated by a price system
5. __________________ individuals are motivated by economic incentives
6. __________________ competition drives the system
7. __________________ all resources, goods, and services are privately owned
8. __________________ an elected authority does the decision-making
9. __________________ rivalry is expected between producers
10. __________________ the system fails when the government fails
11. __________________ some markets are “free” and some are regulated
12. __________________ the market fails when one party becomes anti-competitive
13. __________________ goods and services are voluntarily exchanged
14. __________________ a master economic plan is fulfilled
15. __________________ government does not intervene
Part 2: Create a foldable with a column for each of the three economic systems. In your
foldable you should describe how each system answers the three main economic questions:
- What should be produced?
- How should it be produced?
- For whom should it be produced for?
You should also list some pros and cons (the good and the bad) of each economic system.
Toward the bottom of each column, draw a picture or attach a magazine cut out that
represents the economic system.
Source: Raasch, J. Econ Workbook. DemiDec Resources, 2008.