Economic Systems

Question 1

Planned Economy/Controlled Economy

Answer 1

• The government and the state owns and controls resources.
• Centralised decision-making by the government.
• Resources are allocated to production based on a cost benefit analysis.
• Firms receive contracts from the government to produce goods and services.

Question 2

Advantages of a Planned Economy/Controlled Economy

Answer 2

• Little or no inflation since the government sets all prices.
• Since the interest of society is the primary objective, de-merit goods and services will not be produced or they will be discouraged.
• Merit goods will be supplied in sufficient quantities.
• There will be adequate production of public goods to satisfy citizens.
• The government distributes income to improve average wellbeing.

Question 3

Disadvantages of a Planned Economy/Controlled Economy

Answer 3

• Consumers’ specific tastes and preferences are not satisfied because the government makes decisions and ignores consumers’ requirements.
• There’s no guarantee of the quality of goods produced.
• Bureaucratic decision-making that will slow down production and distribution.
• Subsidising firms encourages their inefficiency.

Question 4

Production

Answer 4

It is the act of creating an output, a good or service which has value and contributes to the utility of individuals.

Question 5

Productivity

Answer 5

is the efficiency. It measures output per unit of input.

Question 6

FOP- FACTORS OF PRODUCTION

Answer 6

resources that are the building blocks of the economy; they are what people use to produce goods and services. there are four.

Question 7

Land

Importance of Land

Answer 7

are the gifts from nature that provide all the raw materials that are used to produce goods and services. Land needs to be developed in some way to create a finished product.

provides all the raw materials that are important for conversion into finished goods.

Question 8

Factors affecting the supply of natural resources

Answer 8

• Reclamation of Land
• Destruction of the Coral Reefs from tourism.
• Natural Disasters
• Discovery of more natural resources
• Excess Hunting

Question 9

Labour and Importance of Labour

Answer 9

the human capital used in the production process.

Makes use of land and capital resources

Question 10

Factors affecting Labour

Answer 10

Health
Work ethics
Education and Skill Building
Quality of the capital(tools, equipment) used
Technology

Question 11

Capital

Importance of Capital

Answer 11

the tools and equipment used in the production process.

Increases the productivity of labour.

Question 12

Factors affecting Capital

Answer 12

Increase in borrowing

Question 13

Enterprise

Answer 13

organises and coordinates the other factors of production to produce goods.

Question 14

Role of the Entrepreneur

Answer 14

• Raising capital.
• Sourcing funds; to fund working capital.
• Undertaking all risks.
• Evaluating Performance (of employees, business).
• Conducting and analysing research information.
• Planning