3.0 - how economies differ

Question 1

describe the nature of a market economy

3.1 - the market economy

Answer 1

a capitalist, free enterprise, laissez faire approach to economy management. pure market economies rely entirely on individuals and private firms for economic decisions. most economic resources are in the private sector leading to hgih poverty and instability.

Question 2

outline the features of a centrally planned economy

3.1 - the market economy

Answer 2

government planners to make economic decisions, public ownership of factors of production and individuals have little to no input.

Question 3

define a free market economy

3.1 - the market economy

Answer 3

markets for all G&S and factors of production

Question 4

what are the drivers of a market economy

3.1 - the market economy

Answer 4

• price mechanism (supply and demand to influence price and quantity)
• private ownership of property
• factor market (market for all FOP’s)
• consumer soverignty (collective influence on market demand determines economic output)
• freedom of enterprise (right to use resources)
• competition (force drives price mechanism)

Question 5

describe the results of a market economy

3.1 - the market economy

Answer 5

• large no. of buyers and sellers
• high innovation driven be competition
• may underprovide public goods
• high risk of market faliure

Question 6

describe the results of a centrally planned economy

3.1 - the market economy

Answer 6

• dominant firms with high control at expense of consumer
• low innovation from lack on insentives
• slow adaptation and responsiveness
• ensures basic needs but lacks freedom and efficiency

Question 7

recount the broad history of australia’s economic approach

3.2 - australia’s market economy

Answer 7

• since 1980s - focus on less gov. intervention
• since 2000s (GFC and COVID) more focus on gov. intervention

Question 8

what are the characteristics of gevernment intervention in Australia’s economy?

3.2 - australia’s market economy

Answer 8

• resource allocation (essesntial G&S in gov. control for safety, security and social provision)
• gov. regulations (Australian Competition and Consumer Commission)

Question 9

describe the role of the Australian Competition and Consumer Commission in the Australian economy

3.2 - australia’s market economy

Answer 9

• provides regulations (prevents producers exploiting consumers and undesirable G&S)
• social welfare payments (for those who do not contribute to prod. process)
• progressive income tax (redistribution of income)
• macroeconomic policies

Question 10

how does the mixed economy solve the question of ‘what to produce’

3.2 - australia’s market economy

Answer 10

• gov. provides collective G&S
• encourage innovation and production through subsidies, tax insentives and start up funds
• limit production of undesirables

Question 11

how does the mixed economy solve the question of ‘how much to produce’

3.2 - australia’s market economy

Answer 11

• limit production of certain G&S
• provide merit goods (desirable but normally unprovided)
• control international trade competition (protectionist trade policies, subsidies and import restrictions)

Question 12

how does the mixed economy solve the question of ‘how to produce’

3.2 - australia’s market economy

Answer 12

• influence the cost of FOP’s through policies and guidelines

Question 13

how does the mixed economy solve the question of ‘how to distribute’

3.2 - australia’s market economy

Answer 13

• imposing minimum wage
• redistribution of income through taxation and benefits