free market, mixed and command economies

Question 1

what is a free market

Answer 1

market that allocate resources that are driven by the profit motive. limited role for state (government). the private sector dominates

Question 2

what is a mixed economy

Answer 2

a mix of state and private ownership. it is a mix of state and private ownership. there is government intervention in markets.

Question 3

what is a command economy

Answer 3

most resources are state owned. planning allocates resources by government with little role for market prices

Question 4

what are the advantages of free market competition

Answer 4

• an efficient allocation of scarce resources - resources tend to go where the market return is the highest
• competition drives innovation and invention in market which can bring higher profits for businesses and better products
• profit motivate stimulates capital investment which encourages economies to lower prices in the long run