Types Of Economic Systems Flashcards
What are the three economic questions?
What to price, for whom to produce and how much to produce
What is an economic system?
The system in which it is determined how much goods and services will be produced
What is a traditional or subsistence economy?
An economy where people provide for their basic needs. In this economy there is little to no trade and little choice or variety in the types of goods produced
What is a free or capitalist economy?
An economic system in which the customer drives the economy
What are characteristics of a free or capitalist economy?
Little government interference, competition among producers and profit motive.
What are advantages of a free or capitalist economy?
Creation of jobs, lack of government intervention, freedom to choose and greater variety and competition keeps prices low and quality high
What are disadvantages of a free or capitalist economy?
Uneven distribution of wealth, little production of public goods and profit is pursued.
What is a command or planned economy?
Economies in which governments assume responsibility for economic planning.
What are characteristics of a command or planned economy?
All resources or factors of production owned by the government, prices are set by government and profit spent on all citizens.
What are advantages of a command or planned economy?
Competition is avoided, The welfare of citizens is the primary goal and social/public goods can be adequately produced like roads or hospitals.
What are the disadvantages of a of a command or planned economy?
Situations of shortages or glut of certain goods may occur, choice of goods tend to be limited and over employment can lead to inefficiency and high cost
What is a mixed economy?
Economic arrangements where government and private individuals make economic decisions.
What are characteristics of a mixed economy?
Combination of public and private sector goods/servicss and factors of production owned by both private and public enterprises
What are advantages of a mixed economy?
The welfare of citizens is considered, creation of Jobs and freedoms to choose and greater variety
What are disadvantages of a mixed economy?
There is some uneven distribution of wealth, profit is pursued and workers may be inefficient due to lack of motivation.
