Functions of Money and Market types Flashcards
1
Q
What are the function of money
A
- Medium of exchange
- A unit which shows the value of a good or services
- A standard of deferred payment
- A store of value
2
Q
what is a free market Economy (Adam smith)
A
- No government intervention
- market mechanism
- Individuals are motivated by profits
- productive efficiency
3
Q
Advantages of free markets
A
- Allows for innovation
- Increases product quality
- leads to increases competition
between producers
4
Q
Disadvantages of Free markets
A
- Massive income disparity
->less choice for those on lower
incomes - Market failure (resources are inefficiently allocated)
5
Q
What is a command economy
A
- Government intervention
6
Q
Advantages of command economies
A
Avoids unemployment due to an efficient allocation of labour
7
Q
Disadvantages of command economies
A
- Undemocratic - citizens have no say
- Often results in a misallocation of
resources
-No economic freedom
8
Q
What is a mixed economy
A
- Midpoint between a command and free economy
- Usually avoid the disadvantages of the free market and command economies
- 50% government intervention
9
Q
what Rational decision making
A
consumers maximise utility
producers maximise profits
government maximise welfare
