1.1.6 Free, Command and Mixed Economies Flashcards
What is a free market economy?
An economy in which market forces are allowed to allocate resources
What did Adam Smith argue about free market economies?
That a free market economy would allocate resources fairly and efficiently
What did Karl Marx argue about the free market economy?
Such economy would allow owners of capital to exploit their position at the expense of labour, eventually resulting in a revolution
What is a command economy?
An economy in which the allocation of resources in guided by the state
What is a mixed economy?
An economy in which resources are guided by market forces and through state
What did Friedrich Von Hayek believe about economies post WW2?
Government was intervening too much with the economies
What did John Keynes believe about economies?
In times of recession and high unemployment, Governments should be more active in the effort to reduce unemployment
Give 5 advantages to the free market economy?
- choice
- competition
- efficiencies
- market equilibrium
Give 3 disadvantage to the free market?
- profit maximisation
- externalities and missing markets
- monopolies
Give 3 advantages to the command economy?
- equal society
- provision of public goods
- prevention of monopolies
Give 6 disadvantages to the command economy?
- poor access to info
- unable to respond to consumer preference
- ineffective firms are kept going
- threat to democracy and liberty
- Bureaucratic
- surplus’ and shortages
