Markets And Economies Flashcards
What do markets do?
A method for allocating resources
What does every buyer and seller do?
Choose to exchange something they have for something they want to have
What is assumed in economics?
Everyone is rational
What is a free market?
Allocates resources based on supply and demand and the price mechanism
What are the advantages of a free market?
Efficiently
Entrepreneurship
Choice
What are the disadvantages of the freee market?
Inequalities
Non profitable goods not produced
Monoplies
What is a planned economy?
The government decides on how resources are allocated
What are the advantages of a command?
Maximise welfare
Low unemployment
Prevent monoplies
What are the disadvantages of the command economy?
Poor decision making
Restricted choice
Lack of risk taking
When do governments intervene?
When there is a market failure
How can governments intervene?
Taxes
Laws
Subsidies
What is a mixed economy?
When governments and markets play a part in allocating resources
What is a mixed economy made up of?
Public and Private sector
What is the public sector?
The government
What is the private sector?
Businesses
