Economic Systems Flashcards
Name four types of economies
a.Traditional (subsistence)
b.Command or planned (socialist)
c.Free or capitalist
d.Mixed (private and public)
What are Green Economies
Green economies rely on renewable, sustainable energy to cut carbon emissions, restore biodiversity, utilize alternative energy sources, and preserve the environment.
What is an Economic System?
This is a system of trade and industry where
wealth is made and used.
What are Subsistence or Traditional Economic Systems
In the past, families and communities produced everything they needed for survival, relying on agriculture, fishing, or hunting.
Types of Economic Systems at a National Level
- Command economy
- Free market economy
- Mixed economy
Give another name for Command Economy
*Planned economy
*Centrally planned economy
*Controlled economy
*Communist economy
*Socialist economy
In a planned economy a central authority makes all the decisions regarding production, prices, distribution, salaries etc.
Characteristics of a Command Economy
Command-based economies are dependent on a
central political agent or authority (the government),
which controls the price and distribution of goods.
This central authority determines what to produce,
how to produce it, and who gets what is produced.
Supply and demand cannot work in this system
because it is centrally planned.
This leads to imbalances.
Four advantages of a Command Economy
Ability to set goals, such as full
employment.
Benefits the entire society rather than a
fortunate minority.
Promotes fairness – since everyone gets
at least enough to survive
Prices are affordable
There is little or no unemployment
Disadvantages of a Command Economy
There is a disconnect between which goods are produced and what is
needed.
Decisions are made by bureaucrats who are out of touch with the
market.
This type of government tends to dismiss individual rights in order to
achieve societal goals.
There tends to be a lot of inefficiency
A lack of incentives mean that workers often lack motivation,
This leads to compromises in the quality of the output
There is a limited variety of products for consumers to enjoy
A lack of competition takes away incentive for products to be of a high
quality
What is a market Economy?
In market economy prices are determined by forces i.e. the force of supply and demand
Characteristics of a Market Economy
Market-based economies allow goods to flow freely through
the market, according to supply and demand.
This type of economy depends on supply and demand or
decisions made by producers and consumers to determine: what
to produce, how to produce it , and who gets what is produced.
This is also known as the price mechanism. It is the manner in
which the prices of goods or services affect the supply and
demand of goods and services
In this type of economy, these forces cause the economy to
“balance out” itself or come to a place of equilibrium – where
supply equals demand.
Advantages of a Market Economy
Freedom of choice
Competition acts as incentive for firms to produce
higher quality goods and services at lower prices
This means that there is a greater variety of goods
and services for consumers to enjoy
The profit motive acts as an incentive for workers
and managers to be motivated to work at a high
standard
The overall standard of living tends to be higher
The Disadvantages of the Market Economy
There are inequalities of wealth; the poor gets
poorer and the rich gets richer
Public goods like roads and streetlights are not
produced
Merit goods like education and health
are under-produced
Poverty exists
Economic “bads” are produced in large quantities for example
refuse
There is no authority to control the production of externalities like
pollution
What is a mixed Economy?
A mixed economy is a combination of Market and Planned Economy
