Economic Systems Flashcards
What is an Economic System
An economic system attempts to respond to the issues of what, how and for whom to produce that came out of scarcity
What are the 4 different types of economies
-Traditional Economy
-Market Economy
-Planned Economy
-Mixed Economy
Define the traditional economy
A traditional economy uses the characteristic of the barter system. Production is sustenance and they consume whatever they produce
Advantages of traditional economy
-there is no over or under pop.
-no unemployment
-community involvement in all areas of production
Disadvantages of traditional economy
-limitations of barter (double coincidence of wants)
-slow rate of inventions
-subsistence farming only for the community will limit economies of scale
What is the market economy
there is minimal to little government intervention and the laws of demand and supply determine the price and quantity of goods produced in an economy.
Advantages of market economy
-consumers and producers have economic freedom to make their own decisions
- A greater variety of g and s creates more choice
-competition amongst firms can cause lower prices and better quality
Disadvantages of market economy
-prices are unstable
-uneven distribution of income since wages are set by market
-too many demerit goods will be produced
What Planned Economy
this is where the elements of an economy are subject to the control of government and regulations designed to achieve objectives in the plan for the economy
Advantages of the planned economy
-little or no inflation (government sets prices)
-gov. distribute income to improve average well being
-demerit goods will not be produced and will be discouraged
Disadvantages of the Planned Economy
-no economic freedom (firms to make decisions)
-limited choice for consumers
-bureaucratic decision making that will slow down production and distribution
What is the mixed economy
an economy in which some companies are owned by the government and other companies are not
Advantages of mixed economy
-government tend to protect consumers and workers
-government will provide public goods that are not produced by the private sector
-gov. limits demerit goods by relocating resources
Disadvantages of mixed economy
-overdependence on the government to provide jobs and g and s
-appropriate degree of gov intervention is hard to determine
=gov intervention may cause greater inefficiency
GL WITH THIS –>
IK ITS LOT OF THEORY BUT IK YOULL DO AMAZEBALLS
