How is the 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 a central planning authority. This means that the government makes all the decisions regarding what goods will be produced, how much will be produced, and how they will be distributed. The central planning authority sets production targets, determines the allocation of resources, and decides the prices of goods and services.

In a command economy, the government usually creates a detailed economic plan that outlines production goals and priorities for different sectors of the economy. This plan is then implemented through a centralized control system, where government agencies and central planners coordinate and direct economic activities.

The government determines which industries or sectors are considered strategically important or crucial for the economy and allocates resources accordingly. Priority is often given to sectors like defense, infrastructure, and basic necessities such as food and healthcare. The government also controls the distribution of goods and services and decides who will receive them based on its own criteria, such as need, social status, or priorities outlined in the economic plan.

While this approach allows for centralized decision-making and potentially avoids market inefficiencies, it can lead to a lack of consumer choice, limited innovation, and potential inefficiencies resulting from the inability to respond quickly to changing consumer demands.