Types of economic systems

Question 1

What is economic system

Answer 1

The term economic system refers to the way in which the resources of a country are used to produce goods and services, In the manner in which these goods and services are distributed for consumption .

Question 2

Characteristics of economic systems

Answer 2

1. a role in the government
2. freedom of choice

3.ownership of natural ,human and natural resources

4. Whether prices are fixed by the state o determined by the forces of demand and supply.
5. Whether profits are owned by individuals who own resources or by the state which then share them out to all citizens

Question 3

Functions of an economic system

Answer 3

1. The allocation of resources
   2.The organization of production
   3.distribution of finished goods and services
   4.The maintenance of economic stability .

Question 4

Types of economic systems

Answer 4

1. Traditional economy
   2.

Question 5

Traditional Economy

Answer 5

Traditional economy is generally regarded as being the operation of primitive societies where individuals existed on subsistence level.

Advantages;

1. Every member of the society knows exactly what to do.
2. There is a strong social network.

Disadvantages

1.This type of society is often very slow

2.It does not take advantage of technological innovation.

3. There is relatively little promotion of scientific development .

Question 6

Free Market /Capitalist Economy

Answer 6

Free Market is an economy in which the government plays little or no part in economic activities.

Characteristics of Free market

1. All economic decisions are made by private individuals known as consumers or producers.
2. Competition between businesses decides how the economy develops.

Question 7

Free Market /Capitalist Economy (Advantages and disadvantages)

Answer 7

Advantages of free market economy

1. There is freedom of government interference
2. There is Complete freedom of choice for and producers .

3.It is mainly the market that determine the price.

4. Competition among firms improves quality.

5 . Consumers demand encourages production of goods people wants to buy ‘

Disadvantages of
free market economy

1.The system lead to inequalities of wealth (the few rich gets richer and the poor remains poor)

2.Large companies eg; monopolies and cartels, can exert powerful influence on prices and supplies and can limit competition

3. Basic goods and services may be neglected.

Question 8

Planned or Controlled Economy

Answer 8

In a planned or or Command economy all economic systems are made by the government. [China and Cuba are examples of planned economy ].

Advantages of planned economy

1. The state ensures that the needs of the whole of there with in the whole whole wealth.
2. The state provide goods and services that enterprise would be un willing to provide .

Disadvantages;

1. Lack of Consumer Choice and Freedom
   2.Inefficiency and Lack of Innovation

Question 9

Mixed Economy

Answer 9

Mixed economy are arrangements in which the government and private individuals make economic decisions to produced

characteristics of mixed economy

1. involvement of both states and private individuals
   2.Efficent use of resources
2. more equitable distribution of income

Question 10

Advantages and disadvantages of mixed economy

Answer 10

Advantages of mixed economy

1.It safeguards private property.

2. It permits prices to be determined by the free market and the principles of supply and demand.
3. It is motivated by the self-interest of people.
4. It enables the government to protect both the people and the market.

Disadvantages

1. Conflict may arise between government and private individuals
2. excessive taxation.

3.limited government intervention