DBE - Types of Economies

Below are the advantages of a Centrally Planned Economy:

1. A nation’s resources can be directed specifically towards a nation’s goals

2. Achieving these goals come at an economic & social cost

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Below are some of the disadvantages of a Centrally Planned Economy:

1. The more complicated the plan, the more likely it is to be inefficient & costly

2. It is difficult to set “reward & recognition” incentives to encourage workers to be productive & deliver quality

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America is a prime example of a Centrally Planned Economy

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Below are some of the advantages of a Free Market Economy:

1. Functions automatically

2. Competition keeps prices down & incentivizes firms to be more efficient

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Below are some of the disadvantages of a Free Market Economy:

1. Free markets may not achieve maximum efficiency without some government intervention

2. Competition can be limited between firms; a few larger firms may dominate an industry

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China is a perfect example of a Centrally Planned Economy

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Below are the advantages of a Mixed Economy:

1. Relative prices of goods

2. Macroeconomic problems

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Below are some of the disadvantages of a Mixed Economy:

1. Government intervention can be used to influence some market failings

2. Governments are not perfect & their actions & interventions can cause both beneficial & adverse reactions

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Trinidad & Tobago is an example of a Mixed Economy

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