Examples of command economies include the former Soviet Union, China, North Korea and Cuba. One of the defining characteristics of this type of economy is the fact that all decisions relating to the economy are decided by a central body, such as the government or leader. Laws, directives and regulations are used to implement the decisions made by this body.Continue Reading
In a command economy, all aspects of business, including how goods are produced, how much they are sold for, and how many of the goods are produced, are variables that are defined by the state. In essence, this means that all businesses in the economy are run by or for the state.
One of the advantages of a command economy is that it makes it easier to mobilize the resources of a country. However, the disadvantage is that the needs of the society are often not fully met, since the market is driven by what the government dictates rather than what people actually want. It is common to find thriving black markets in such settings, which people use to get access to any products they need but cannot get through official government channels. Innovation is frequently stifled in such an economy because regulations may not change quickly enough to take advantage of new ideas.Learn more about Types of Government