Lesson 8 -types of economy

Question 1

Define the term traditional economy?

Answer 1

Each new generation retains the economic position of its parents and grandparents

Question 2

Define the term command economy?

Answer 2

The state/ government controls all resources

Question 3

What is a free market economy?

Answer 3

An economy based on consumers buying decisions

Question 4

What is a mixed economy?

Answer 4

Combines the command and free market models

Question 5

Give one advantage of a command economy?

Answer 5

Welfare maximised - government has more control over the economy so workers are treated equally and fairly.

Question 6

Give another advantage of a command economy?

Answer 6

Low unemployment as the government can provide jobs.

Question 7

Give a disadvantage of a command economy?

Answer 7

Poor decision making - lack of information means the government often make slow and poor decisions

Question 8

Give another disadvantage of a command economy?

Answer 8

Restricted choice - no votes and limited choice

Question 9

Give a third disadvantage of a command economy?

Answer 9

No incentive to work hard as you will not be rewarded.

Question 10

Give an advantage of a free market economy?

Answer 10

Efficiency - any product can be bought and sold. Only those of the best value (price/ quantity) will be in demand. Firms have an incentive to make goods efficiently.

Question 11

Give another advantage of a free market economy?

Answer 11

Entrepreneurship - A market economy rewards good ideas and risk taking

Question 12

Give another advantage of a free market economy?

Answer 12

The customer has lots of choice and pays less for their goods as firms have to make their prices competitive.

Question 13

Give a disadvantage of a free market economy?

Answer 13

Inequality - massive gap between the rich and poor

Question 14

Give another disadvantage of a free market economy?

Answer 14

Non profitable goods may not be made - if there is no profit to be made then businesses may not produce the product

Question 15

Give another disadvantage of a free market economy?

Answer 15

Firms can dominate markets

Question 16

Define the term mixed economy?

Answer 16

When both the government and the market play a part in allocating resources.

Question 17

In a mixed economy, what is the government known as?

Answer 17

Public sector

Question 18

In a mixed economy, what do all businesses make up?

Answer 18

The private sector

Question 19

In a pure command economy, which sector would not be a thing?

Answer 19

The private sector, everything would be controlled by the government.

Question 20

Give a way in which the government intervene in society

Answer 20

Changing laws to stop firms from doing something

Question 21

Give another way which the government intervene in society?

Answer 21

Change tax levels to incentivise or punish behaviour

Question 22

Give a third way in which the government can intervene in society?

Answer 22

Influence the economy by buying or selling goods and services