Cambridge AS A Level Business Studies/ ZIMSEC Advanced Level Business Studies/ Business Enterprise Skills Notes: Planned/Command Economy

  • We looked at the features of planned economies here
  • We will now examine the advantages and disadvantages of such an economic system
  • It is important to note that for the most part:
  • The advantages of command economies are usually the disadvantages of free market economies
  • The converse is also true, the advantages of free market economies are usually the disadvantages of a command economy

Advantages of command economies

  • Unemployment is usually low to none-existant as the government makes sure everyone has a job
  • All essential goods and services are produced even if they are unprofitable to make for example merit and public goods are provided sometimes free of charge
  • There is no duplication of resources
  • There is equitable distribution of wealth
  • The government is in charge so they can handle social costs such as pollution
  • Prices are kept in control
  • Elimination of waste that results from competition among entities providing the same goods/services

Disadvantages

  • Consumers have limited choice as there is no brand variety
  • Business operations tend to be inefficient as there is no profit motive
  • Bureaucracy when it comes to making decisions
  • This makes the system inflexible when it comes to anticipating and satisfying consumer needs and wants that are constantly changing
  • Encourages corruption as it puts limitless power in the hands of a few bereaucrats

To access more topics go to the Advanced Level Business Studies/ Business Enterprise Skills page

To access more topics go to the Cambridge AS A Level Business Studies page