Economic Systems

Question 1

What is an economic system?

Answer 1

Economic system is a system by which countries and government distribute resources and trade goods and services

Question 2

Types of economic systems are?

Answer 2

Capitalism (Free market or uncontrolled economy)
Socialism(Centrally Planned or controlled economy)
Mixed economy

Question 3

Capitalism meaning

Answer 3

Capitalism is a type of economy in which the means of production are owned and controlled by private individuals

Question 4

Features of capitalism

Answer 4

• They operate with the aim of maximizing profit
• The factors of production are owned by private individuals but government maintains law and order
• The price system regulates the major economic decisions relating to production and consumption
• There is freedom of individual to own property and use as he or she likes
• Decision of basic economic problems are taken by private individuals

Question 5

Advantages of capitalism

Answer 5

There is freedom of choice by consumers and producers
Freedom to own property and the factors of production
It promotes increased standard of living
Capitalism removes the tendency for the growth of dictatorship

Question 6

Disadvantages of Capitalism?

Answer 6

There is an exploitation of consumers
There is high degree of unemployment
There may be waste and inefficient use of productive resources
The profit motive may have dangerous consequences on society

Question 7

Features of socialism

Answer 7

The state owns the factors of production
Major economic decisions are taken by the state or government
The main aim is to maximize public welfare and raise the general standard of living
Allocation of goods and services is carried out by the government