The Mixed Economy Flashcards
What is a planned/command economy?
An economy where all key economic decisions are made by the government
What is a free market economy?
An economy where all key economic decisions are made by individuals and firms
What is the public sector?
Any organisations owned/controlled by the government
What is the private sector?
Any organisations owned/controlled by individuals and firms
What are the four types of public sector organisations? Name an example of each.
Central government departments (eg. Central Bank of the UAE)
Public corporations (eg. DEWA)
Local authority services (eg. KHDA)
Other public service organisations (eg. police)
What are the four aims of the public sector?
Improving quality of services
Minimising costs
Allowing for social costs and benefits
Profit
What are the three types of private sector organisations?
Sole Traders
Partnerships
Companies
What is the aim of the private sector?
They are usually driven on self-interest or profit maximisation but can have other objectives.
Define ‘market failure’.
When the market fails to provide resources efficiently.
What are the five causes of market failure?
Externalities Lack of Competition Missing Markets Lack of Information Factor Immobility
What is an externality?
The cost or benefit that a third party incurs as a result of production/consumption of a good or service
How do externalities lead to market failure?
Firms don’t take into account all the costs of production which can lead to negative external costs being imposed onto society.
How does lack of competition lead to market failure?
One or two companies dominating a market can lead to high prices for consumers and inefficiency
How do missing markets lead to market failure?
The public sector has to provide goods and services that the private sector doesn’t see a profit incentive in so that everyone can afford them.
What are merit goods?
Goods that are underprovided by the public sector
