What is command economy? Define and discuss with the help of an example. 5 marks

A command economy, also known as a planned economy, is an economic system where the government has control over the production and distribution of goods and services. In this system, the government determines what to produce, how to produce it, and who gets the final product. The government sets prices and decides how resources are allocated.

The main goal of a command economy is to ensure that all citizens have access to goods and services, regardless of their personal wealth. This is in contrast to a market economy, where goods and services are distributed based on supply and demand, and prices can fluctuate based on these factors.

One of the most well-known examples of a command economy is the former Soviet Union. The government controlled all aspects of economic production. The state owned all businesses and farms and set prices for all goods. This system was intended to create a society in which everyone had access to goods and services without the inequalities of the capitalist system.

However, the command economy in the Soviet Union also had its drawbacks. For example, the lack of competition led to a lack of innovation and efficiency. Additionally, the government's control over all aspects of the economy often led to corruption and a lack of incentives for workers.

In conclusion, a command economy is a system where the government controls all aspects of economic production. While it can ensure that all citizens have access to goods and services, it can also lead to inefficiencies and corruption.