• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Outline the positive and negative features of the command economy.

Extracts from this document...


06.12.03 Outline the positive and negative features of the command economy The essential economic problem is limited resources, such as land, labour, capital and enterprise, in relation to unlimited wants. Because of this, people need to answer the three basic economic questions: what to produce, how to produce and for whom to produce. Therefore there is a need for effective resource allocation with effective answers or rather methods of organizing the production, distribution, exchange, sharing goods and services. Allocation of scarce resources is organized through several different economic systems. The idea of the command economy is to answer the three basic economic questions completely by the government (not by the market forces) and that means also that all factors of production are owned by the government. It is based upon the Karl Marx's (1818-1883) theory that all people are equally. This way of answering the questions is not perfect and hence contain both advantages and disadvantages. Positive features1 The Government is very powerful (so overall there is the possibility to grow economically very quickly from a poor background) ...read more.


Because they are just quantitative, growth occurs, but without development. A good real world example are the consequences of the cold war (1945-1991): there was an increase in the output of military goods, but no equal increase in the output of civilian goods, therefore no development: diagram 1: PPF 14 The consumer could only choose to spend income on those things the government decided to produce. Consumer wishes were often a poor third in the plan after investment needs and defence needs were met.5 Production costs are not reflected in prices. For example, it may cost more to produce a good or service, than the purchased price is. Since prices act not as signals, the government just suppressed the inflation, because it is not possible to convert prices because of the difference of inside parameters to outside parameters. One of the results is that the economy is when not able respond quickly to new conditions. And so there is only little economic efficiency, first, because in reality there is unemployment, (it is likely to be hidden or disguised), but many people produced very little, their marginal product is very low, inefficiency is high and secondly, the principles of ...read more.


Diagram 2: PPF 28 The comparison with a country without command economy shows that the other country is nearer to the PPF and the command with command economy is not close enough to the PPF, that means there is ineffective use of factors of production. The aim to maximize profits is more important to the human nature than to serve the public interest. Yet it is not completely useless - the positive features, to produce more public/merit goods, use all combinations of factors of productions and produce for all people, are integrated so that the economy is nearer to the PPF, by using the command concepts of the circular flow of income, transfer payments, commodity agreements, taxes and price controls. 1 Ideas from webnotes #108, #109 & #113 from economics.isdedu.de 2 Idea from Economics from a global perspective, Second Edition, Alan Glanville, p.195 3 Ideas from webnote #101 4 Diagram from Economics from a global perspective, Second Edition, Alan Glanville, p.14 5 Idea from Economics from a global perspective, Second Edition, Alan Glanville, p.196 6 From the free wikipedia encyclopedia 7 Idea from Economics from a global perspective, Second Edition, Alan Glanville, p.195 8 Webnote #116 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Peer reviewed

    The Advantages and Disadvantages of a Command Economy or Free Market Economy

    4 star(s)

    The advantages include that fact that people will have more to work for and therefore will produce more efficiently, which in turn could increase GDP. Unemployment would also be low, as in a free market economy most likely there would be no such thing as minimum wage, and therefore everyone would have to work again increasing taxation revenue.

  2. Free essay

    What are the main characteristics of a free market economy and centrally planned economy?

    The decreasing government involvement also means that there is a deficiency of legal institutions to handle the setting and collecting of taxes and affirming ownership, which allows companies to take over defunct government run enterprises.

  1. Outline the main features of a market economy and compare it to a Command ...

    A command economy is the complete opposite of a free-market economy when it comes to private property, as there is no private property. All property and capital are owned by the state and any profits or costs produced from this capital go to the state.

  2. Features of command economies

    So the technical progress is stagnant. In command economies, there are no rewards for over-filling the plan, only penalties for under-filling it. Accordingly a manager's first task was always to get the target reduced. All the people get same wage, so they don't need to care about the quality of the good.

  1. Highlight the features of a command economy and discuss the merits.

    Since the government set the prices there is no competition in the command economy. In a command economy there is a little supply and demand. Everything is controlled by the government which does not the prices to rise up too high or to drop too low.

  2. Discuss the view that the free market economy encourages negative externalities and thus the ...

    lead to less than optimal results in terms of prices charged and outputs produced, i.e. the allocation of resources is less than ideal. The market system is often touted to produce a Pareto optimal outcome. The equilibrium allocation of goods and services determined in a perfectly competitive market is shown

  1. The Ohio Pilot Scholarship Program

    of local milieux (the attachment to one's house, the ambivalent sense of belonging, the connection one has to one's neighbour, the ruptured connection to the past) "have proved to be astonishingly persistent." In reading this paper, one is struck by the rather narrow self-interest that motivates Paul and Olga as they describe their attachment to their town.

  2. Chinese economy sets for soft landing in 2005.

    In his speech, Wen talked about China's macro economic performance, which has come to the attention of the international community. "I can tell you responsibly that China's overall economic situation is good," he said. Since last August, in response to some outstanding contradictions and problems in economic performance, the Chinese

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work