In a command economy, the government or a central authority makes all the major decisions regarding the production and distribution of goods and services. This includes determining what to produce, how much to produce, and at what price to sell the goods.
The rationale behind this system is to achieve specific societal goals, such as equality or full employment, rather than leaving these decisions to the free market forces of supply and demand. The government may set production targets for various industries and allocate resources accordingly. This means that individual businesses and consumers have limited influence on economic outcomes, as the central authority often dictates the terms of trade.
In essence, a command economy contrasts sharply with a market economy, where decisions are largely made by private sector participants based on their own interests and market signals. In a command economy, the focus is on centralized control, leading to debates about efficiency and flexibility in responding to consumer needs.