Economic Systems (LS6) Flashcards
Command economy:
An economy in which resources are allocated solely by the state.
Mixed economy
An economy in which resources are allocated by the state and the price mechanism.
Free market economy
An economy in which resources are allocated by the price mechanism.
Public sector
Part of the economy that’s controlled/ owned by the government
Private sector
Part of economy that’s not controlled/owned by government
Market share
Concentration of firms in supermarket industries
In what economies do firms have a profit motive and why?
Free market and mixed economies as firms develop new products and meet consumers demand.
In command economies, profit motive is absent. What does this mean/lead to?
Firms are told what to produce which leads to limited choice for the consumers.
What can limit choice in free market and mixed economies?
Concentrated markets + monopoly
Why do free market and mixed economies have a less equitable distribution of income and wealth compared to command economies?
Owners of capital and land accumulate wealth over time and pass privilege on to their children through: property, private education & social networks.
Why’s inequality still a problem in command economies?
Corruption
A state is made up of:
Territory
Citizens
Government
Government
Rules over state at any given time
State is ________ . Government is not.
Permanent and made up of citizens.
Role of state in mixed economy
Allocates resources through planning.
Redistributes incomes through welfare spending.
Regulates consumers + firms.
