types of economy

Question 1

free market

Answer 1

all resources are allocated by market using functions of price mechanism
-signals
-incentivises
-rations
no gov. intervention
-e.g. 1960 USA

Question 2

mixed economy

Answer 2

the resources are allocated by price mechanism (phones) and gov. (education)
-UK

Question 2

command economy

Answer 2

all resources allocated by gov.
-1980 North Korea

Question 4

Smith

Answer 4

-came up with Specialisation and the division of labour
- free markets
-invisible hand / price mechanism
-laissez-faire gov unless there is market failure

Question 5

Marx

Answer 5

-didn’t like free market because it leads to capitalism which leads to unequal society
-capitalism would eventually collapse
-command economy

Question 6

Hayek

Answer 6

• free markets
• impossible for gov. to collect information needed in command economy
  -so gov. would produce wrong things
  -e..g North Korea famine

Question 7

free market economy (+/-)

Answer 7

+ price mechanism is efficient
- lead to inequality
+ lower prices (due to competition)
- monopolies
+ choice
- market failures (under provide public goods)

Question 8

Command Economy (+/-)

Answer 8

+correct market failure
-gov. failure
+less inequality
- destroy incentive
+ stop monopoly abuse
- limited choice