Economic Systems Flashcards
Economic System
a network of organisations used to resolve the problem of what, how and for whom to produce
free markets
where resources are allocated by the markets through the price mechanism and there is a limited role of the state
e.g singapore, new zealand
who decides what to produce in a free market
consumers
who decides how to produce in a free market
producers
for whom are things produced in a free market
for those who can afford
advantages of free markets
-consumer sovereignty
-efficient use of resources
-high levels of innovation
-high competition should lead to lower prices
disadvantages of free markets
market failure (monopoly, immobility, under consumption of healthcare)
command economy
where most resources are state owned, therefore the state allocated resources according to its view of peoples wants and needs
e.g north korea
who decides what is produced in a command economy
the government
who decides how things are produced in a command economy
the government
For whom are things produced in a command economy
for everyone
mixed economy
where some resources are owned by the public sector and some by the private sector. Typically, the state supplies certain goods and services (healthcare, education) and intervenes to correct market failure. otherwise the price mechanism allocated resources
who decides what is produced in a mixed economy
consumers and the government
who decides how things are produced in a mixed economy
producers and the government
for whom are things produced in a mixed economy
for everyone
