What is a command economy?

A command economy is defined as an economic system in which the government exerts significant control over the production and distribution of resources and goods. In this type of system, the central authority makes decisions regarding what to produce, how to produce it, and for whom it is produced. This level of control can extend to setting prices, managing supply, and regulating industries.

In a command economy, the government often prioritizes specific social or economic goals, which can lead to a planned economy where resources are allocated in a manner designed to achieve these goals rather than being determined by supply and demand dynamics found in more market-oriented systems. As a result, choice and competition are limited, contrasting sharply with market economies driven by individual entrepreneurship and consumer preferences.