what are the advantages and disadvantages of a command economy?
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There are benefits and drawbacks to command economy structures. Command economy advantages include low levels of inequality and unemployment, and the common good replacing profit as the primary incentive of production. Command economy disadvantages include lack of competition and lack of efficiency.
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['Advantage: Keep Control of the Company. ... ', 'Advantage: Bank Loan is Temporary. ... ', 'Advantage: Interest is Tax Deductible. ... ', 'Disadvantage: Tough to Qualify. ... ', 'Disadvantage: High Interest Rates.']
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['Advantage – Cost Reduction. ... ', 'Advantage – Security. ... ', 'Advantage – Reliability. ... ', 'Disadvantage – Downtime. ... ', 'Disadvantage – Security. ... ', 'Disadvantage – Cloud Service Closes Shop.']
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Key Takeaways. Market economies utilize private ownership of the means of production and voluntary exchanges/contracts. In a command economy, governments own the factors of production such as land, capital, and resources. In reality, all economies blend aspects of the two.
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How does a command economy adapt to change? government leaders control the factors of production and make all decisions about their use. ... The market—the voluntary exchange of products between buyers and sellers—guides economic choices instead of tradition or government control.
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A fundamental difference between the command system and laissez-faire capitalism is that, in command systems: the division of output is decided by central planning rather than by individuals operating freely through markets. ... The regulatory mechanism of the market system is: competition.
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While a free market economy is a market system whereby the pricing of goods and services is primarily determined by the sellers and buyers, and is hence based on demand and supply, a command economy is an economy whereby the market system is fully controlled by the government.
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The advantages of capitalism include: Consumer choice - Individuals choose what to consume, and this choice leads to more competition and better products and services. Efficiency of economics - Goods and services produced based on demand create incentives to cut costs and avoid waste.
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What are the potential benefits of moving from a command economy to a market - based system? In a command economy you have no freedom or choice on what you want to do but in a market - based system you have choice on what you want to produce or sell and there is competition for who has the best products and quality.
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['Raises prices of products or services. ... ', 'Creates gaps in communication. ... ', 'Creates unemployment. ... ', 'Prevents economies of scale.']
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['Convenience.', 'Flexible operation.', 'Greater control.', 'Lower transit times.', 'Lower inventory levels.', 'Reduced damage.', 'Driver as salesperson/customer relations rep.', 'Last resort.']
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['Advantage – Clear Chain of Command. ... ', 'Advantage – Clear Paths of Advancement. ... ', 'Advantage – Specialization. ... ', 'Disadvantage – Poor Flexibility. ... ', 'Disadvantage – Communication Barriers. ... ', 'Disadvantage – Organizational Disunity.']
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Decentralization has advantages and disadvantages. Advantages of decentralization include better, more timely decisions and increased motivation. Since it also eases the burden on top management, there is less management firefighting, or day-to-day problem solving.
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Higher profit acts as an incentive for entrepreneurs to set up a business. Without the reward of profit, there would be less investment and fewer people willing to take risks. In a command economy, there is no profit incentive but this can easily lead to a lack of incentives.
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['Advantage: Less Infrastructure. ... ', 'Advantage: Limited Waste. ... ', 'Advantage: Strong Customer Relationships. ... ', 'Disadvantage: Equipment or Labor Failure. ... ', 'Disadvantage: Missed Deliveries.']
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A traditional economy is a system that relies on customs, history, and time-honored beliefs. ... 2﻿ A market economy is a system where the laws of supply and demand direct the production of goods and services. A command economy is where a central government makes all economic decisions.
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['ADVANTAGES.', 'Cost Effectiveness. ... ', 'Improved Quality Assurance. ... ', 'Increased Productivity. ... ', 'Work In Hazardous Environments. ... ', 'DISADVANTAGES.', 'Potential Job Losses. ... ', 'Initial Investment Costs.']