Different Types of economies

Question 1

Name the 3 types of economies

Answer 1

Free Market economy
Mixed economy
Command economy

Question 2

Describe a free market economy

Answer 2

-Resources allocated through price reduction consumer determines what is produced by their willingness to spend their money on food
-Consumers make decisions based on satisfaction and producers make decisions based on profit
-Individuals are free to make their own choices and own the factors of production without government interference

Question 3

Give advantages of a free market economy

Answer 3

-resources are efficiently allocated,leading to customet satisfaction,increasing sales
-a free market economy encourages competition due to lack of government interference
-consumers have a wider selection of products

Question 4

Give disadvantages of a free market economy

Answer 4

-there is a high chance of a monopoly forming which lowers competition
-firms can get away with poor working conditions for workers due to lack of government intervention
-can lead to inequality due to lack of government interference
-can lead to market failure

Question 5

Describe a command economy

Answer 5

A system where the government decides goods and production,process,quantity and price in a country
In this system,the government also manages income and investments

Question 6

Give disadvantages of a command economy

Answer 6

-lack of innovation and competition
-less freedom for work leaders to lower quality products
-less flexibility
-can lead to government failure
-distorts the price mechanism

Question 7

Give advantages of a command economy

Answer 7

-government gives incentive for people to work,protection of personal freedom
-efficient production and allocation of resources as well as the improvement of social welfare
-can correct market failures

Question 8

According to Adam Smith The price mechanism is also known as the … …

Answer 8

Invisible hand

Question 9

Describe a mixed economy

Answer 9

Resources are allocated through the government and the price mechanism

Question 10

Which type of economy did Adam Smith support

Answer 10

Free market

Question 11

Which type of economy did Karl Marx dislike the most and why

Answer 11

Free market,because the lack of government intervention can lead to capitalism and the exploitation of workers

Question 12

Which type of economy did Karl Marx support

Answer 12

Command economy

Question 13

What type of economy did Freidrich Hayek support and did not support

Answer 13

-Supported Free market (the price mechanism is a communication network)
-Did not support command economy