Micro- 1.2 The Allocation Of Resouces

Question 1

What’s a free market economy?

Answer 1

A firm owned by a private sector where price is determined by supply and demand.

Can lead to income and wealth inequality, market failure or monopoly.

Question 3

What’s a command economy?

Answer 3

Owned and managed by government. There’s less of an incentive to be efficient.

Leads to inefficiency, less choice, less freedom.

Question 4

What’s a mixed economy?

Answer 4

Some decisions are made by the government and some are made by the market forces.

Question 5

What’s allocative efficiency?

Answer 5

When resources are used in a way that best meets the needs and wants of society

Question 6

What’s productive efficiency?

Answer 6

When a business, industry or economy is producing goods or services at the lowest possible cost, using all resources fully and efficiently.