Module 2 Flashcards
(15 cards)
What is a command economic system?
When the government decides
- what to produce
- who to produce for
- how much to produce
What is an economic system?
The problem of resources allocation.
What are some disadvantages of a command economic system?
No choice on what to buy
No choice on what to do
No profit motivation
Black market
What is a free market economic system?
Where the government has no control
Everything is either produced privately or not at all.
What are some advantages/ disadvantages of a free market economic system?
Ad - more choice
Profit motivation
Competition arises
No shortages to an extent
Dis - wealth gaps
Monopolies are created
Public good May not be provided
Merit goods will only be for those who can afford them
What is a mixed economic system?
When some sectors are privately owned, and others are owned by the government
Define taxes.
A fee charged on a product, activity or income by the government
What is privatisation?
The transfer of ownership from the public sector into the private sector.
An example of privatisation.
Mid-Med = HSBC
What are some advantages/disadvantages of privatisation?
Ad - decision making is faster,
Profit motivation
Firms respond to consumer demand
Gov. Receives money from the sale of shares
Dis - many employees may lose their jobs
Privatised firm may diversify the products
Privatised firm must provide money itself
What is nationalisation ?
When a firm in the private sector is taken over by state into the public interest.
Why nationalise?
To control monopolies
To maintain a public service
To protect employment
For safety
Disadvantages of nationalisation,
Slows down growth
Decision making becomes slow
No choice
What are monopolies?
A market structure in which there is only one producer/seller.
What is scarcity?
The fundamental economic problem.
