LS6- Types of Economy

Question 1

Command economy

Answer 1

Resources are allocated solely by the state

Question 2

Mixed economy

Answer 2

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

Question 3

Free market economy

Answer 3

Resources allocated only 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

Mixed and free market economies
- have profit motive incentive to start businesses
- allows wider choice for consumers, as firms constantly develop and improve products to best meet consumer demands

Command economies
- no profit motive as firms are told what to produce
- limited choice for consumers

Question 7

Efficiency in mixed and free market

Answer 7

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