How are prices determined in a command economy?

In a command economy, prices are determined by the government or central planning authority. The government sets the prices for goods and services based on their perceived value and the overall economic goals of the country. This is done through a process of central planning, where the government decides what goods and services should be produced, how much should be produced, and at what price they should be sold.

The government typically uses a system of price controls and regulations to enforce the prices it sets. This can involve setting maximum prices to prevent inflation or price gouging, as well as setting minimum prices to ensure producers receive a fair income. The government may also use subsidies or taxes to influence prices and encourage or discourage the production or consumption of certain goods and services.

In a command economy, the government's control over prices is intended to ensure equitable distribution of resources and promote social welfare. However, this centralized approach can often lead to inefficiencies, lack of competition, and limited consumer choice. Additionally, the government's ability to accurately determine prices and allocate resources can be influenced by political factors, which may result in misallocation of resources and economic distortions.