Economics Command Economy Questions Medium
In a command economy, the role of supply and demand is significantly diminished compared to market economies. In this type of economic system, the government or central authority has control over the allocation of resources, production decisions, and distribution of goods and services.
Unlike in a market economy where supply and demand determine prices and production levels, in a command economy, the government sets production targets and decides what goods and services will be produced, how much will be produced, and at what price they will be sold. The government also determines the allocation of resources, such as labor and capital, to different sectors of the economy.
While supply and demand may still exist to some extent in a command economy, they do not play a significant role in shaping the overall economic decisions. The government's central planning and directives take precedence over market forces. The focus is on meeting the needs of the society as determined by the government's goals and priorities, rather than responding to consumer preferences and market signals.
However, it is important to note that even in command economies, there can be some limited interaction between supply and demand. For example, if there is excess supply or shortage of a particular good, the government may adjust production targets or prices accordingly. But overall, the government's control and planning dominate the economic decision-making process in a command economy.