Micro: 1.1.6 Free market economies, mixed economy and command economy Flashcards
What are the different types of economic systems?
The different types of economic systems include a free market economy, a mixed economy, and a command economy.
What is a free market economy?
A free market economy is one where individuals are allowed to pursue their own interests, leading to efficient and fair economic functioning.
What is a mixed economy?
A mixed economy is one where markets allocate many resources, but governments intervene to ensure a minimum standard of living and correct market failures.
What is a command economy?
A command economy is one where the government makes all decisions regarding the production and distribution of goods and services.
What did Adam Smith argue about economies?
Adam Smith argued that economies function most efficiently when individuals pursue their own interests, and that government intervention is a threat to economic growth.
What was Friedrich Hayek’s criticism of command economies?
Friedrich Hayek criticized command economies for their inability to process the information required to distribute resources effectively.
What did Karl Marx believe about free market economies?
Karl Marx believed that free market economies would break down because business owners make huge profits at the expense of workers.
What is the general consensus among economists regarding free markets?
Most economists argue that free markets are the most efficient in using resources to meet consumer needs, but they also lead to unequal distribution of income and wealth.
How do governments intervene in mixed economies?
Governments intervene by raising revenue through taxes and redistributing income in the form of benefits and direct provision of services such as healthcare.
