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Definition: Communism

Communism is a political and socio-economic ideology that is based on the principle of common ownership which states that all assets/produce indivisibly belong to all common members. Communism seeks to promote equality by eliminating social classes by opposing capitalism.

In a communist society, the working class owns all the produce and there is no disparity among them. The produce is distributed on the basis of need and not effort, with the aim to meet only the basic needs of each community member. This type of an economy results in lower levels of production and economic activity leading to mass poverty.

Communist governments follow a command economy, also called a planned economy wherein the government acts as a dictator and decides the type of goods to be produced by the economy, the quantity to be produced as well as the prices at which they must be sold. Command economies do not allow the free markets to determine price and quantity of the goods produced. Command markets suffer from the knowledge problem which is the inability of the government accurately determine the quantity and prices of the goods to be produced for an efficient economy. As a result of inefficient allocation, command economies usually suffer from excess supply and excess shortages of the goods produced. China, Cuba and North Korea are some examples of communist countries.



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