A command economy is defined as an economy where all decisions are made by a small group of political leaders who have the power to enforce their decisions throughout the entire economy, where free enterprise, individual profit, and consumer needs are not encouraged.3 Wages and income are provided based on the social value of the service provided.4 A classic example of this kind of economy is the Soviet Union of the 20th century, where the government controlled how income was distributed.5 Looking at this information, it is concluded that there is very low income inequality in a command economy because all economic decisions are unbiased and are made by one central government. The perfect examples of a command economy is a communist and socialist …show more content…
Resources are limited and therefore it becomes crucial to be able to allocate them effectively. If these recourses were divided equally, there would be a lower level of income inequality in most places, however because the economy is already imbalanced in regards to income the resources are then spread our unequally as well. In a traditional economy, what, how and for whom to produce are decisions that are answered by looking into the past.12 In this kind of economy, it is difficult to describe what typical economic tools are used to allocate resources because no two traditional economies are the same.13 In a command economy, the government decides what, how and for whom is to be produced and this results in the economic resources being allocated equally to satisfy the needs of all the citizens of a country and causes little economic disparity between them.14 In an market economy, the decisions of what, how and for whom are answered through the market mechanism. Supply and demand, without any government intervention, determines how the resources are allocated.14 This can cause very high disparity of income because resources are provided to those who can afford to pay and not to everyone equally. If the governments of these economies were to provide the working class with labour-related benefits, individuals would be able to afford these resources and income inequality could be