How does a pure command economy answer the basic question of which goods and services should be produced?

Answer 1

In a pure command economy, the government or a central authority makes all the decisions regarding the production of goods and services. As such, it directly answers the question of what goods and services should be produced.

Key factors determining production in a pure command economy are typically based on government priorities, social needs, and political objectives. The central authority determines the types and quantities of goods and services that should be produced based on such considerations. Economic planning committees or similar bodies often play a vital role in making these decisions.

The decision-making process in a pure command economy is primarily driven by the government's perception of what is necessary for the society as a whole. It focuses on fulfilling collective needs rather than individual preferences or market demand. Therefore, production decisions in a command economy reflect the government's goals, such as increasing the country's self-sufficiency, prioritizing the development of specific industries, or addressing societal inequalities.

While this approach enables a more coordinated and controlled allocation of resources, it also faces criticism for potential inefficiencies, lack of innovation, and limited responsiveness to changing consumer demands.