How is allocation of goods and services production determined in a command economy

Answer 1

In a command economy, the allocation of goods and services production is determined by the government or central planning authority. The government makes all the decisions regarding what goods and services will be produced, how much will be produced, and for whom they will be produced.

The central planning authority creates a comprehensive plan that dictates the allocation of resources, sets targets for production, and determines the prices of goods and services. This plan is usually created based on the government's priorities, such as achieving specific economic or social goals.

The government might directly own and control the means of production, such as factories and resources, or it might allocate resources to state-owned enterprises or specific industries. The allocation of resources and production decisions are typically directed by a centralized bureaucracy or planning agency.

In a command economy, there is minimal or no involvement of market forces or price mechanisms in determining the allocation of resources. Instead, the decisions are made based on the government's central plan, which is implemented through directives and regulations.

This system of central planning has been associated with several disadvantages, including inefficiency, lack of flexibility, and a potential for resource misallocation. Without the guidance of market forces, it may be difficult for the central planners to accurately determine the needs and preferences of consumers, resulting in the overproduction or underproduction of goods and services.