economic systems

Question 1

What is Socialism?

Answer 1

The belief that the government owns all the resources on behalf of the people.
Key Ideas:
- government provides for people
- The goal of socialism is to spread wealth more evenly and to treat all people fairly.
- Socialist systems emphasize equal distribution of wealth among the people.

Question 2

What is capitalism

Answer 2

belief that resources used in production should be owned privately.

Key Ideas:
- citizens, not governments, own and run companies
- these companies compete with other companies for business.
- Producers are motivated to provide goods and services for consumers with the aim of making a profit for themselves.

Question 3

What are the 4 main types of economic systems?

Answer 3

Traditional, planned, mixed & market.

Question 4

What is a Traditional Economy?

Answer 4

an economic system in which people produce enough for their own needs through methods such as hunting, gathering and farming.

• Money is not used.

Question 5

What is a market economy?

(CAPITALIST)

Answer 5

an economic system in which private individuals exchange goods and services with consumers in a free market, and in return, keep the profit.

Prices: prices determined by supply and demand
Ownership: firms owned by the private sector.

Examples: Japan and UK

Question 6

What is a free market?

Answer 6

an economic system in which prices are determined by competition between privately owned businesses.

Question 7

What is a planned economy?

(SOCIALIST)

Answer 7

Where the government:
- predominantly owns the resources
- decides what goods and services to produce.
- how to produce them and who they will be distributed to

Prices: The government controls prices
Ownership: industry owned and managed by the government

China and Venezuela

Question 8

What is a mixed economy?

Answer 8

Some resources and businesses are privately owned while others are owned by the government.

• both free markets and government intervention play a role in economic decision-making
  Examples: Australia, US, Singapore, Vietnam

Question 9

Key participants in this economy are:

Answer 9

1. Consumers (or ‘Households’)
2. Producers (or ‘Businesses’)
3. Government
4. Financial institutions

Question 10

What do consumers (participants in this economy) do?

Answer 10

-buys goods and services
- pay taxes
- receive government benefits

Question 11

What do producers (participants in this economy) do?

Answer 11

• produce goods and services
• aim to make a profit
• pay taxes

Question 12

What do the government (participants in this economy) do?

Answer 12

• charge taxes
• pay wages
• spend on goods and services

Question 13

What do financial insitutions (participants in this economy) do?

Answer 13

• hold savings
• lend money
• aim to make a profit

Question 14

What is globalisation?

Answer 14

all the countries of the world are linked and should be seen as one.

Question 15

What is an economic system?

Answer 15

• the level of control the government has over the economy.
• where countries and governments distribute resources and trade goods and services.

Question 16

How are material living standards impacted by goods and services?

Answer 16

access to goods and services and income. Access to goods such as food, shelter and clothes can improve individuals living standards. Having jobs can lift people out of poverty and provide them with a higher standard of living.

Question 17

How are non-material living standards impacted by goods and services?

Answer 17

quality of life factors such as leisure time, life expectancy, air quality (intangible aspects that improve your lifestyle).