1.1.6 - Free Market, Mixed & Command Economies Flashcards
What Does The Economic System Aim To Do?
Allocate scarce resources.
What Is A Free Market Economy?
Has no government intervention in the allocation of resources or the distribution of goods and services.
What Is A Command Economy?
(2 Points)
~ All of the resources are owned by the state.
~ The government controls the distribution of goods and services.
What Is A Mixed Economy?
~ Is a blend of the free market and command economy. ~ As individuals, firms and the government own factors of production and distribute goods and services.
Who Created Free Markets?
Adam Smith.
Who Created Mixed Economies?
Friedrich Hayek.
Who Created Command Economies?
Karl Marx.
What Are The Advantages Of The Free Market Economy?
(4 Points)
~ Profit incentive, which motivates people to work or develop ideas.
~ Greater variety of goods and services.
~ Competition leads to lower prices, better quality and encourages innovation of goods and services.
~ More efficient use of scarce resources.
What Are The Disadvantages Of The Free Market Economy?
(4 Points)
~ Increases inequality.
~ Workers get exploited.
~ Product quality falls as firms lower quality standards in order to increase profits.
~ Resource depletion and environmental degradation are often ignored.
What Are The Advantages Of The Command Economy?
(4 Points)
~ All workers receive the same wage, which helps create social equality.
~ Less unemployment.
~ Resources of the nation can be directed towards the urgent priorities quickly.
~ Less inequality as social equality is the goal.
What Are The Disadvantages Of The Command
Economy?
(4 Points)
~ Lack of innovation.
~ Continual lack of efficiency.
~ Less skills as people earn the same wage.
~ Personal freedoms are restricted.
How Does Government Intervention Occur In A Mixed Economy?
Through taxation, then spending that revenue to redistribute income and provide essential goods and services.
