LS6 - Types of Economy

Question 1

Command economy

Answer 1

Resources are allocated solely by the state

Question 2

Mixed economy

Answer 2

Reources allocated by the state and the price mechanism (public + private sector)

Question 3

Free market economy

Answer 3

Resources are allocated by price mechanisms

Question 4

Public sector

Answer 4

Part of an economy controlled or owned by the government

Question 5

Private sector

Answer 5

Part of an economy not controlled or owned by the government

Question 6

Profit motive

Answer 6

Firms in mixed and free market economies have an incentive to start business and make a profit - wider choice for consumers, as firms constantly develop and improve products to best meet consumer demands.
No profit motive in command, as they are told what to produce, limited choice for consumers

Question 7

Efficiency

Answer 7

Optimal production and distribution of scarce resources
Mixed and free market - more efficient as there is more competition + profit motive