Types of Economies

Question 1

free market economy

Answer 1

Econ s4ys that resolves basic econ prob thru market mechanism

Question 2

command economy

Answer 2

econ sys where gov thru planning process allocates resources in society

Question 3

Mixed economy

Answer 3

Economy where both FM mechanism & gov planning process allocate sig proportions of total resources

Question 4

Allocate resource ways (2)

Answer 4

• Market mechanism
- brings B & S who agree on a price for a product being sold

• Planning Allocates resources thru administrative decisions

Question 5

EVAL: Choice

Answer 5

ADV
•FM- increase choice of employment for workers

DISADV
• Command - more direction w/ workers being jobs & citizen have less income after tax than FM so can’t spend lots on g/s
(limited choice)

Question 6

EVAL: Quality & innovation

Answer 6

ADV
• FM - incentives built info sys to innovate & produce more quality gs

DISADV
• FM - Assumes C have power to make free choices
Markets dominated by few large P who manipulate market thru ads & other forms of marketing

Question 7

EVAL: Efficiency

Answer 7

ADV
• FM - increase efficiency bc competition ( competitive markets = efficient to survive )

DISADV
• Mixed - competition limited be few large firm dominate market (monopoly)
• Command - inefficient bc workers no incentive to work efficiently - only meet targets to stay out of trouble

Question 8

EVAL: Growth

Answer 8

ADV
• fM - Increase rate of growm → assumed to be dynamic

DISADV
• Command - gov control limits innovation

BUT - Mixed & FM have same lul of dev growth at similar rates in LT

Question 9

EVAL: Distribution Of income & Wealth

Answer 9

DISADV
• FM - larger inequality gaps than mixed/command
-BC → resources produced by gov thru planning processes & distributed more equally
→ high income earners pay more tax in command than FM