Economic Systems

Question 1

define an economic system.

Answer 1

the manner in which decisions are made with regard to the following:
– how the factors of production are organised in order to
– produce and distribute goods and services

Question 2

what are the basic differences between the economic systems?

Answer 2

1) WHAT is being produced?
2) HOW (quantity and by whom) is production taking place?
3) FOR WHOM are they being produced for?

Question 3

what are the three basic economic systems?

Answer 3

1) Planned economic system
2) Free economic system
3) Mixed economic system

Question 4

what is the focus of a planned economic system?

Answer 4

what the government needs (mainly industrial goods) and little emphasis is placed in the manufacturing of consumer goods that the ordinary man on the street needs.

Question 5

what is being produced in a planned economic system?

Answer 5

only that which the government approves

Question 6

how is production taking place in a planned economic system?

Answer 6

the government decides on the quantity of each product that requires production or the services that need to be provided, as well as who will produce them. There is often no freedom of choice to choose your own career.

Question 7

for whom is it being produced for in a planned economic system?

Answer 7

the government decides who will receive the goods and services (after they have taken what they need).

Question 8

what is another term for a planned economic system?

Answer 8

1) communism
2) socialism

Question 9

what are the advantages of a planned economic system?

Answer 9

1) theoretically, there should be no unemployment because the government will be employing all citizens to create goods and services for the country.
2) the government ensures that all citizens have access to basic/ essential services like healthcare.

Question 10

what are the disadvantages of a planned economic system?

Answer 10

1) consumers’ needs are very low on the list of priorities when it comes to decisions about products and services that should be provided.
2) there are limited choices of products (why would the government want to provide a variety of the same kind of product?)
3) all resources belong to the government, there is very little reason for citizens to preserve them, or put them to effective use.
4) products and their prices are controlled by the government

Question 11

what are examples of countries with a planned economic system?

Answer 11

1) Cuba
2) North Korea

Question 12

what is the focus of a free market economic system?

Answer 12

economic activities depend on the supply and demand.

Question 13

what happens in a free market economic system?

Answer 13

the government does not interfere in the functioning of the economy and industrial goods and consumer goods are produced according to those products or services that are required.

Question 14

what is being produced in free market economic system?

Answer 14

all items that are required

Question 15

how is production taking place in a free market economic system?

Answer 15

businesses that compete with one another to make as many products as they need to sell in order to make a profit.

Question 16

for whom is it being produced for in a free market economic system?

Answer 16

for those people who are able to afford the products.

Question 17

what are the advantages of a free market economic system?

Answer 17

1) people have the opportunity to work hard and become successful
2) entrepreneurship is strong because there is a financial reward and this ensures competition.
3) there is a variety of products and services.
4) resources are privately owned and people therefore are motivated to use resources effectively.

Question 18

what are the disadvantages of a free market economic system?

Answer 18

1) there is an unfair distribution of wealth
2) monopolies are often formed where there is only one supplier of a products and/or service.
3) there is little motivation for people to provide public services as there is very little money to be made from them.
4) businesses are faced with intense competition which leads to bankruptcy, resulting in job losses.

Question 19

define a mixed economic system.

Answer 19

a combination of both a planned and free market system.

Question 20

what happens in a mixed market economic system?

Answer 20

the production, distribution and pricing of goods and services are controlled by supply and demand bu the government does control certain economic activities.

Question 21

what is being produced in a mixed market economic system?

Answer 21

a combination of what the consumers are prepared to pay and what the government regards as important.

Question 22

how is production taking place in a mixed market economic system?

Answer 22

both the government (public sector) and entrepreneurs (private sector) decide on this– it all depends on the product or service under discussion.

Question 23

for whom is it being produced for in a mixed market economic system?

Answer 23

both the government and private consumer needs are taken into consideration.

Question 24

what are the advantages of a mixed market economic system?

Answer 24

1) social services (school, hospitals, and safety) are provided by the government.
2) the government creates work opportunities because certain goods and services need to be provided.
3) a combination of the advantages of a planned and free market system.

Question 25

what are the disadvantages of a mixed market economic system?

Answer 25

1) the public sector is often bureaucratic, resulting in delayed processes and decisions, which frequently result in poor services being offered/ delivered.
2) often comprises a combination of the disadvantages of a planned and free economic system.

Question 26

how can the global economy of globalisation be defined?

Answer 26

the international trade of goods and services

Question 27

what does it mean when our world is becoming a ‘smaller place’?

Answer 27

because transport and communication is being improved daily, through the development of technology, communicating with others in different countries and the multiple methods of transport, our world is becoming a smaller place.

Question 28

what are the advantages of globalisation?

Answer 28

1) because businesses are no longer only competing against others in the country, but with other businesses in the world, the daily reality of importing and exporting goods and services leads to a wider variety of goods and services available to consumers.
2) there is freedom to work elsewhere in the world, although, in turn the original country starts to face brain-drain.
3) because capital can freely move between countries, businesses can invest in countries that offer opportunities to make a profit.

Question 29

what are the advantages of international trade for first world countries?

Answer 29

1) because first world have more capital and skills within the country, it is easier for them to manufacture products from natural resources, whereas in developing countries, the emphasis is mainly on the extraction of natural resources that are sold to developed countries at a relatively low price.
2) governments of first world countries can afford to subsidies industries in their countries, which allows industries to manufacture products at much lower costs per unit, which is often dumped into third world countries at very low costs, contributing to businesses going bankruptcy then unemployment.
3) unemployment and low standards of living in third world countries limit productivity.
4) developed countries have established economies and their exchange rates are stronger than developing countries where economic development still needs to take place.

Question 30

define a dualistic economy.

Answer 30

an economy that has characteristics of both a developed and developing economy, but is not exactly a second world country.