1.1.6 Free Market, Mixed And Command Economies Flashcards
What is a free market economy?
A free market economy is one with no government intervention
Who advocated a free market economy?
Frederick Hayek
What is a Mixed economy?
A mixed economy is a free market with some government intervention
Who advocated a mixed economy?
Adam Smith
Why did Adam Smith believe in some government intervention?
He believed that there was a role for government intervention in order to ensure efficient allocation of scarce resources
What is a Command economy?
An economy that wants to share the means of production and ownership with all workers in society. Requires the abolition of private property
Who advocated command economies?
Karl max advocated command economies
What is a command economy ?
An economy in which all of the resources are owned by the state and the government controls the distribution of goods/services
What is a mixed economy?
A blend of the free market and planned economy as individuals, firms and the government own factors of production and distribute goods/services
What is a free-market economy?
An economy that has no government intervention in the allocation of resources and distribution of goods/services
What are the pros of a free market economy?
Profit incentive motivates people, greater variety of goods, competition means better quality, lower prices because of competition, innovation, better standards of living, more efficient use of resources
What are the cons of a free market economy?
Wealth is concentrated in the hands of a few people, increased inequality, Product quality can decrease to increase profits, workers exploited, resource depletion and environmental damage ignored, Monopolies, increased exploitation
What are the pros of a Command economy?
Social equality, all workers receive same wage, less unemployment, resources directed to urgent priorities, government owns monopoly businesses
What are the cons of a command economy?
Same wage can disincentivise people, lack of competition means less innovation, lack of efficiency so surpluses or shortages, black markets multiply, access to higher standards of living, personal freedom restricted
