Emily - P2 C1

What is an economic system?

• The decisions about the allocation of resources are taken through market forces.

• The way in which production is organised and choices are made in the economy

• Decisions about allocation of resources are taken by the government

• Decision about allocation of resources are taken by public and private sectors

What is free market?

• Decision about allocation of resources are taken through market forces.

• Decision about allocation of resources are taken by state

• Decision about allocation of resources are taken by both private and public sector.

• The way in which production is organised and choices are made in the economy

What does it mean by price mechanism in a free market?

• Price provide signals and incentive to producer and consumer

• Consumer express change in their preference by their decision to buy or not to buy at a given price

• This will signal a firm to changes in consumer's demand, given the incentive of profitability

• Government have no direct rule

• Encourage investment and innovation.

What do they mean by competition in a free market?

• Firms can use resource as they choose.

• No single producer can control the price or market supply.

• Large number of sellers

• Lack of bureaucracy

• Inequality of distribution of income

What are not the advantages of a free market?

• Low price for consumers

• Hiqh quality goods/services

• Firms are innovative and effective

• Equal distribution of income and wealth

• Full employment of resources

What is a planned economy?

• Decision about allocation of resources are taken by private or public sectors

• Decision about the allocation of resources are taken through market forces

• The way in which the factors of production is organised and economic decision are made in the economy

• Decision about the allocation resources are taken by the government.

What are the characteristics of a planned economy?

• Resorces owned by the government

• Economic decisions made by government

• Price determined by the government

• Aim of production is to maximise social welfare

• property are privately owned

What are the positive impacts of planned economies?

• Equal distribution of income

• Lesser social problems

• Maximisation of profit

• Customers satisfaction is guranteed

What are the disadvantages of a planned economy?

• Lack of incentive and initiativr by firms

• Limited variety and freedom of choices

• Inefficient use of resources

• Over-consumption of demerit goods

• Inequality of distribution of income

What is a mixed economy?

• Decision about the allocation of resources are taken by private and public sector

• Decision about the allocation of resources are taken through market forces

• Decision about the allocation resources are taken by the state.

• The way in which the factors of production are organised and choices are made in the economy.