6 - Types Of Economy Flashcards
What is planning?
The process by which a government allocates its resources
Who funds planning?
Taxpayers
What is a market?
Anywhere buyers and sellers exchange goods and services. Can be physical or digital
What is a price mechanism?
The process by which the market allocates resources
What is a command economy?
An economy where resources are allocated by only the government
What is a mixed economy?
An economy where resources are allocated by the state and the price mechanism
What is a free market economy?
An economy where only the price mechanism allocates the resources
What is the public sector?
The part of the economy that the government owns or controls
What is the private sector?
The part of the economy that the government does not own or control
In which economies do firms have a profit motive?
Mixed and free market economies
What does profit motive lead to?
Wider choice as firms are incentivised to develop new products and meet consumer demand
Where is profit motive absent?
Command economies
Why is profit motive absent in command economies?
Firms are told what to produce leading to limited range/choice
What limits choice in mixed or free market economies?
Concentrated markets (few large sellers) Monopolies (one sole supplier)
What are the advantages of free market and mixed economies?
Quality and innovation are higher due to competition and profit motive
