Economic Systems

Question 1

Define economic system

Answer 1

How the factors of Production(land, labour, capital, rent) are organised to produce goods and services

Question 2

What are the 3 basic differences(economic issues) between different economic systems?

Answer 2

What is being produced?
How (quantity and by whom) is production taking place?
For whom are they being produced?

Question 3

What are the 3 basic economic systems?

Answer 3

Planned Economic System
Mixed Market System
Free Market System

Question 4

Define a planned economic system.

Answer 4

What is being produced? - Only what government approves
How (quantity and by whom) is production taking place? - No freedom of choice
For whom are they being produced? - Government decides

Question 5

Define a free market system.

Answer 5

What is being produced? - All items that are required
How (quantity and by whom) is production taking place? - Businesses that compete with one another
For whom are they being produced? - People who can afford to buy it

Question 6

Define a mixed market system.

Answer 6

What is being produced? - What consumers are prepared to pay and what the government regards as important
How (quantity and by whom) is production taking place? - Both the Public and Private sectors
For whom are they being produced? - Government and consumer needs are considered

Question 7

Give advantages and disadvantages of a planned economic system.

Answer 7

ADVANTAGES:
No unemployment in theory(government employs all citizens)
All citizens have access to basic/essential services

DISADVANTAGES:
Consumers needs very low regarding provision of services
Government regulated and owned - Limited choices of products
Little reason to preserve/ effective/ initiative/ hard work
Price controlled by government

Question 8

Give advantages and disadvantages of a free market system(capitalism)

Answer 8

ADVANTAGES:
Can work hard and become successful
Entrepreneurship - reward and competition ensures reasonable prices and quality
Variety of products/services
Resources privately owned/used effectively (recycled and reused)

DISADVANTAGES:
Unfair distribution of wealth - struggle to participate / rich richer and poor poorer
Monopolies: limited competition and higher price and lower quality
Little motivation to provide public services - very little money
Price controlled by government
Intense competition - lead to bankruptcy and job losses

Question 9

Give advantages and disadvantages of a mixed market system.

Answer 9

ADVANTAGES:
Social services provided by government
Government creates work opportunities
Combination advantages of planned and free market - depends how much interference from government

DISADVANTAGES:
Public sector often bureaucratic - delayed responses/decisions and poor services
Combination of disadvantages of planned and free market system - depending on interference

Question 10

Define globalisation and give a reason

Answer 10

Globalisation is international trade - better transport and communication

More competition between businesses
Competition between countries
Money flows between countries
International travel
Exchange rates
Freedom to work in another country
Government subsiding production 
More choice for the consumer
Etc...

Question 11

What makes a country a first/third-world country?(dualistic economy)

Answer 11

Political stability
Democracy
Economic stability
Standard of living
Literacy levels
Infant mortality
Unemployment
Poverty
Infrastructure