6. Types of economies

Question 1

the functions of an economy

Answer 1

decide on:

1. what to produce?
2. how will it be produced?
3. whom will it be produced for?

Question 2

economic system

Answer 2

a complex network of individuals, organisations and institutions that allocates resources.

Question 3

two main ways resources have been allocated

Answer 3

1. the market mechanism

2. planning

Question 4

the market mechanism

Answer 4

allocates resources through bringing together buyers and sellers who agree on a price for the product or resource being sold.

Question 5

planning

Answer 5

allocates resources through administrative decisions

Question 6

free market economies

Answer 6

the majority of resources are allocated through markets rather than through government and planning

Question 7

mixed economies

Answer 7

more resources are allocated through government planning than in free market economies, there tends to be a greater allocation of income through welfare benefits.

Question 8

command economies

Answer 8

most resources are allocated by the state and the market mechanism only plays a small part.