1.1.6 Flashcards
(15 cards)
what is a command economy?
it’s where all resources are owned by the government or central authority who decides
the central government dictates the level of production of goods and controls their central distribution and prices
e.g china, ussr, Cuba, iran
what are the key aspects of command economy?
there is a state ownership of resources
the state determines the price
etc
what are the advantages of a command economy?
greater equality
macroeconomic stability
external benefits and costs
no exploitation
full employment
resources may be allocated by the state to maximise social welfare
what are the disadvantages of a command economy?
inefficient
lack of incentives to take risks
restrictions on freedom of choice
shortages and surpasses
bureaucracy
no consumer sovereignty
inflexibility
what are the disadvantages of a command economy ?
inefficiency
lack of incentives to take risks
restrictions of freedom of choice
shortages and surpasses
bureaucracy
no consumer sovereignty
inflexibility
what is a free market economy?
the basic economic problem is solved by market forces, the forces of supply and demand work together to determine what price and quantity of goods and services are supplied
what are the key aspects of a free market economy?
light touch regulation of labour, production and financial market
legal system focuses on protecting property rights
freedom to trade internationally and promote free movement of capital labour
limited market intervention
low tax environment
consumer preferences determine allocation of resources
what are the disadvantages of free market economy?
free market activity can lead to a rise in the scale of income and wealth inequality
businesses can develop monopoly power
under non-provision of pure public goods
under-provision of merit goods (health and education)
it may fail to address negative externalities from production and consumption
deregulated financial markets often prone to bows of instability
what are the disadvantages of free market economy?
free market activity can lead to a rise in the scale of income and wealth inequality
businesses can develop monopoly power
under non-provision of pure public goods
under-provision of merit goods (health and education)
it may fail to address negative externalities from production and consumption
deregulated financial markets often prone to bows of instability
what is a mixed economy?
there is a degree of government intervention
it prioritises economic growth
government regulation
entrepreneurs can make profit
freedom to set up buisness
what is a mixed economy?
there is a degree of government intervention
it prioritises economic growth
government regulation
entrepreneurs can make profit
freedom to set up buisness
what are the advantages of a mixed economy?
taxes contribute towards other sectors
prioritised economic growth
minimise risk of labour exploitation
less conflict between public vs private sectors
more enterprise = more jobs
what are the advantages of a mixed economy?
taxes contribute towards other sectors
prioritised economic growth
minimise risk of labour exploitation
less conflict between public vs private sectors
more enterprise = more jobs
what are the disadvantages of a mixed economy?
there is still unemployment and social divide
more taxes
exploitation still exists
state is inflexible to changing to consumer needs
what are the disadvantages of a mixed economy?
there is still unemployment and social divide
more taxes
exploitation still exists
state is inflexible to changing to consumer needs
