1.1.6

Question 1

Free market economies

Answer 1

Governments leave markets to their own devices, so the market forces if supply and demand allocate scarce resources
Everything private
Adam Smith + Friedrich Hayek free market economists

Question 2

What to produce
How to produce it
For whom to produce

Answer 2

1) determined by what the consumer prefers
2)Producer seek profits
3) whoever has the greatest purchasing power

Question 3

Advantages of free market economy

Answer 3

• firms are more likely to be efficient, provide goods and services demanded by consumers
• the bureaucracy from gov intervention is avoided
• more personal freedom

Question 4

Disadvantages of free market economy

Answer 4

• ignores inequality
• could be monopolies
• overconsumption of demerit goods
• public goods not provided in a free market

Question 5

Command economy

Answer 5

Government allocates all the scarce resources in an economy to where they think there is a greater need
Karl marx

Question 6

What to produce
How to produce it
For whom

Answer 6

1) determined by what the gov prefers
2) gov and their employees
3)who the gov prefers

Question 7

Advantages of command economy

Answer 7

• easier to coordinate resources in times of crisis
• gov can compensate for market failure
• inequality reduced
• abuse of monopoly prevented

Question 8

Disadvantages of command economy

Answer 8

• gov fails, as do markets. Might not have full information
• may not necessarily meet consumer preferences
• limits democracy and personal freedom

Question 9

Mixed economy

Answer 9

Has features if both command and free market economy