Question

Jane Doe is a shop owner in the fictional country of Xanadu. Every month the government’s planning ministry sends her a large booklet (which resembles a phone book) regulating the price of essential commodities including milk, flour, and eggs. In response to these regulations Jane Doe has reduced her inventory of essential goods and switched to selling luxuries such as cakes, pies, and soft drinks. Luxury goods are not price controlled. Does Jane Doe reside in a command economy? Why or why not?

Answer 1

Xanadu is not a command economy, it can be classified as a mixed market economy.

Step-by-step explanation:

Since Jane is allowed to run her own business, Xanadu cannot be considered a command economy (e.g. communism). Since the government does regulate several products (enough to resemble a phone book and they were large), it is not a market economy (capitalism) either. It is mixture of both (mixed market economy), since private ownership is allowed, but the government does intervene in some aspects of the economy.

Answer 2

No, Private Ownership

Step-by-step explanation:

Jane Doe cannot be said to reside in a command economy because a command economy is mainly characterized by state ownership and the determination of prices and choices of goods and services to be produced; by the government

In the scenario, Jane Doe owns her own shop owner in the country of Xanadu, and private ownership is not found in command economies.

However because the government’s planning ministry sends her a large booklet (which resembles a phone book) regulating the prices of essential commodities, it implies that there is a degree of government intervention.

Such private ownership plus government intervention characterizes a mixed economy.