Estonia essay plan

Question 1

First part of essay

Answer 1

Introduction : Define what is meant by a centrally planned economy and a free market economy

Question 2

what is a centrally planned economy (COMMAND ECONOMY)

Answer 2

an economy where all factors of production, except labour, is owned by the state, and the government allocates scarce resources

Question 3

what is a free market economy

Answer 3

an economy which has no government intervention, economic agents are free to make decisions and market forces supply and demand allocate resources

Question 4

Point 1.

Answer 4

Advantages of free market

Question 5

What are advantages of a free market(point)

Answer 5

• there is high motivation as people know working hard could lead to high potential rewards, creating conditions where initiative and enterprise and flourish
• because firms are in competition, they will produce goods at the lowest cost they can, ensuring productive efficiency

Question 6

Example - Paragraph 1

Answer 6

“by privatising many state owned enterprises, Estonia improves efficiency and productivity in these sectors”

• PISA tests, science 4th, maths 7th, Reading 3rd

Question 7

Contextualised analysis - Paragraph 1

Answer 7

• high specialisation and division of labour
• adam smiths views

Question 8

Adam smith views

Answer 8

• Specialisation and division of labour and how it can increase labour productivity
• this allows firms to increase efficiency and lower their costs of production

Question 9

what is labour productivity

Answer 9

output per worker

Question 10

what is specialisation

Answer 10

The production of a limited range of goods by companies or individuals, which means that trade is essential as it is the only way they’re able to access all they need

Question 11

What is the division of labour?

Answer 11

When labour becomes specialised in a particular part of the production process

Question 12

Point in evaluation- Paragraph 1

Answer 12

Free market could lead to high levels of inequality, as the rich own more factors of production and so can grow richer
- cons of specialisation/ division of labour, Karl Marx stated that modern work is alienated, workers doing repetitive tasks may cause them to become bored of their jobs

• “workers need to see themselves in the objects they have created”

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Question 13

Point - Paragraph 2

Answer 13

another advantage of free market is that it increases competition between businesses. the lack of government intervention promotes business startups

Question 14

Example - Paragraph 2

Answer 14

Liberalisation - Liberalising it’s trade policies and reducing barriers to entry in many industries, increases competition and promotes innovation, for example, Skype was created in Estonia

Question 15

Contextualised analysis - Paragraph 2

Answer 15

Supply and demand diagram
caption - businesses are efficient by setting prices at PE and quality at QE which reduces wastage

Question 16

Point in evaluation- Para 2

Answer 16

• because of the lack of government intervention , monopolies may form, a single dominant business which owns 25% of market share and charge high values for low quality of service
• monopolies will restrict output and increase price, meaning that price will be above PE and output will be below QE
• monopolies can also result in anticompetitive behaviour