In a command economy, the answers to the three fundamental economic questions are determined by a central controlling authority (usually the government).

  • All resources (land, capital) are held by local, provincial, or federal governments.
  • Citizens have no influence in economic decision-making.
  • Prices have no influence in economic decision-making.
  • This economy is known as the communist system.
The government determines what.
The government determines how.
The government determines for whom.

Think about this...

What do you think would happen if a central controlling authority was concerned with only its own well-being.

Many members of the society not part of the ruling class would likely be hungry (perhaps starving), poorly housed and clothed, uneducated, and unwell. These conditions ultimately could lead to uprising, rebellion, or revolution. An example is the Bolshevik revolution in 1917 during which the Russian populace overthrew the ruling Tsarist regime.