A command economy is where a central government makes all economic decisions. Either the government or a collective owns the land and the means of production.
In a free-market economy, private individuals or groups are in control. The government is in control of a command economy. Mixed economies have elements of both.
The relationship between the individual and state in a communist nation is that they work in practice and that the government controls every economic decision.
Once goods and services are produced, the society has to decide who is going to receive them and ways this is decided are through price system, majority rule, lottery, first come: first serve, shared equally among everyone and military force. Who receives the new cars?
Economic systems are grouped into traditional, command, market, and mixed systems.
Government intervention to overcome market failure Public goods. Merit goods / Positive externalities. Negative externalities. Regulation of monopoly power. Disaster relief.
Disadvantages of government intervention For example, government tariffs to protect domestic industry spark off a trade war, where the economy contracts. Lack of incentives. In the free market, individuals have a profit incentive to innovate and cut costs, but in the public sector, this incentive is not there.
Communism is a political and economic ideology that positions itself in opposition to liberal democracy and capitalism, advocating instead for a classless system in which the means of production are owned communally and private property is nonexistent or severely curtailed.
A communist society is characterized by common ownership of the means of production with free access to the articles of consumption and is classless and stateless, implying the end of the exploitation of labour.
List of the Disadvantages of a Centrally Planned Economy There are high levels of inefficiency in a centrally planned economy. You will still find a lot of waste in this system. Consumers receive a complete lack of choice throughout their society. Most centrally planned economies restrict individual rights.
Economic Assumptions People have rational preferences among outcomes that can be identified and associated with a value. Individuals maximize utility (as consumers) and firms maximize profit (as producers). People act independently on the basis of full and relevant information.
People make choices because they cannot have everything they want. All choices require giving up something (opportunity cost) Economic decision- making requires comparing both the opportunity cost and the monetary cost of choices with benefits. purchase goods and services. Why do people save money?
What will we never do in a world of scarcity? Meet all of society’s wants. Due to limits on our time, money, and effort, we are best off when we allocate those things by constantly assessing the opportunity costs of our choices.