What typically happens in a command economy?

In a command economy, the government plays a central and authoritative role in making most economic decisions. This means that all aspects of economic activity, including what to produce, how to produce it, and for whom to produce, are dictated by government policies and plans rather than by market forces. The government, instead of individual consumers and businesses, decides on the allocation of resources and the distribution of goods and services.

This structure contrasts sharply with market economies, where decisions are largely made based on consumer preferences and the interactions of supply and demand. In a command economy, the emphasis is on centralized control, potentially leading to a lack of variety in products and inefficiencies in resource allocation, since the decisions may not reflect the actual needs and wants of the population. The system can also inhibit individual freedoms in economic choices, as the government’s directives take precedence over personal or collective aspirations in the marketplace.