1.1.6 Types Of Economics (mixed, Free, Command, Role Of State, Smith, Hayek, Marx)✅

Question 1

Explain a free market economy?

Answer 1

• competitive (firms compete for market shares)
• limited gov intervention
• freedom of choice (free enterprise)
• motivation of self-interest

Question 2

Explain a command economy? (What are the features)

Answer 2

• limited enterprise
• workers instructed on what to do
• central gov make economic decisions (public ownership of resources, price determined by state, aims set by state, allocation by state)
• no domestic competition
• greater income and wealth equality.

Question 3

In a free market how are economic problems solved?

Answer 3

Market forces (market mechanism).

Question 4

In a command economy how are economics problems (what how when products are produce and who they are allocated to at what price) are decided?

Answer 4

By the government.

Question 5

What are the three fundamental economic questions?

Answer 5

What to produce, who will produce, how to produce it.

Question 6

Explain adam smiths beliefs and the market he supports?

Answer 6

Recognises government role in economy ( keep allocation efficient and watch raises in price). However economies work best when individuals follow their self interest. So mixed economy.

Question 7

What did Karl Marx believe and what market did he support?

Answer 7

He believed that the free market (capitalism) would efficient but unstable and would lead to revolution (socialism). He thought state should be the planner and own production. Command economy.

Question 8

What did Friedrich Hayek believe and what market did he support?

Answer 8

He believed that gov interests in market would lead to inefficiency and no growth. Also that gov did not have enough info to make decisions and mistakes would be made (surplus or shortage of goods). Believed gov was about law and order that’s it. Free economy.

Question 9

Advantage of free markets?

Answer 9

• has competition (promoted intervention and lower prices)
• also more choices for consumer (cheaper price)
• profit drive so want to reach best PPF
• enterprises (take risks)

Question 10

Advantages of command market?

Answer 10

• have equality in income and wealth.
• less profitable items still prioritised.
• less risk of market failure.
• less unemployment exploitation.
  -more eco conscious.

Question 11

Disadvantage of free market?

Answer 11

• exploitation
• Quality falls when profit is prioritised
• Big gap in wealth and income.
• market failure.
• unemployment
• important goods that are not profitable, don’t get produced.
• monopoly affect.

Question 12

Disadvantages of command economy?

Answer 12

• income equality desicentivises advancement of skills.
• less desire for best ppf (so inefficiency).
• less selection.
  -less enterprise.
• less innovation and growth.

Question 13

Tell me some characteristics of a mixed economy?

Answer 13

• government intervenes through tax and redirects through services (schools, healthcare, benefits)
• allows free markets and supply and demand to allocate and determine prices. (Market mechanisms).
• self interest is still used to make choices and strive for best profit.

Question 14

Name some of the criteria for evaluating economies?

Answer 14

• economic growth
• income inequality
  -life expectancy
• access to healthcare
• social mobility
• happiness index

Question 15

who believed that gov integration would cause no growth and inefficiency? Why did they believe this?

Answer 15

Freidrich Hayek
Because gov doesn’t have enough info plus has role of law and order.

Question 16

What are mixed economies like in some countries?

Answer 16

• gov owns specific industries. (energy)
• guides the economy (redistribution through tax)