In many nations around the world, including the United States, an economic system known as the free market is used. This means that prices are determined by supply and demand with little control by the government.
On the flip side, some nations have a command economy. This means that prices are not determined by the free market but are instead set by the government. The government also determines what should be produced and how much.
Let’s look at a few examples. In a nation with a free economy, a manufacturer decides to produce a toy. Christmas is right around the corner, so the manufacturer releases a limited amount at a premium cost. Demand for the toy is high, and consumers are willing to pay more to receive the product. The manufacturer increases production immediately after Christmas because demand is still high. Then, as more people have acquired the toy, it’s less in-demand. The manufacturer then decides to slow down production and drop the price due to the decrease in demand.
Conversely, in a command economy, the manufacturer would have no say in what is produced, how much is produced, or the pricing. This would all be determined by the government. There is no competition in this type of economy. The government also oversees investments and incomes in a command economy.
Command economies are a feature of Communist nations. Nations that have this type of economy include:
There are 7 command economies that can be found on many continents, including Europe, Asia, North America, and Africa.
The seven command economies are Belarus, China, Cuba, Iran, Libya, North Korea, and Russia.