Lesson 8 -types of economy Flashcards
Define the term traditional economy?
Each new generation retains the economic position of its parents and grandparents
Define the term command economy?
The state/ government controls all resources
What is a free market economy?
An economy based on consumers buying decisions
What is a mixed economy?
Combines the command and free market models
Give one advantage of a command economy?
Welfare maximised - government has more control over the economy so workers are treated equally and fairly.
Give another advantage of a command economy?
Low unemployment as the government can provide jobs.
Give a disadvantage of a command economy?
Poor decision making - lack of information means the government often make slow and poor decisions
Give another disadvantage of a command economy?
Restricted choice - no votes and limited choice
Give a third disadvantage of a command economy?
No incentive to work hard as you will not be rewarded.
Give an advantage of a free market economy?
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.
Give another advantage of a free market economy?
Entrepreneurship - A market economy rewards good ideas and risk taking
Give another advantage of a free market economy?
The customer has lots of choice and pays less for their goods as firms have to make their prices competitive.
Give a disadvantage of a free market economy?
Inequality - massive gap between the rich and poor
Give another disadvantage of a free market economy?
Non profitable goods may not be made - if there is no profit to be made then businesses may not produce the product
Give another disadvantage of a free market economy?
Firms can dominate markets
Define the term mixed economy?
When both the government and the market play a part in allocating resources.
In a mixed economy, what is the government known as?
Public sector
In a mixed economy, what do all businesses make up?
The private sector
In a pure command economy, which sector would not be a thing?
The private sector, everything would be controlled by the government.
Give a way in which the government intervene in society
Changing laws to stop firms from doing something
Give another way which the government intervene in society?
Change tax levels to incentivise or punish behaviour
Give a third way in which the government can intervene in society?
Influence the economy by buying or selling goods and services
