Module 4: Business Economics

What are the 3 main types of Economic Systems:

Answer explanation

A Market Economic

A Planned Economic

A Mixed Economic

It is one in which resources are allocated by means of the price mechanism.

• Market Economy

• Planned Economy

• Mixed Economy

Among the advantage claimed for a market economy are __, _, , _.

Answer explanation

Consumer Sovereignty

Incentives for workers and firms to be efficient and innovative

Lack of bureaucracy

The possible disadvantages of a market economy include __

Answer explanation

Inequitable distribution of income

A risk of unemployment of resources

Under-consumption of merit goods

Over-consumption of demerit goods

Lack of provision of public goods

Information failure

Abuse of market power

A product that people cannot be stopped from consuming even if they are not willing to pay for it and once used can still be used by others.

• Demerit Goods

• Merit Goods

• Public Goods

A product the government considers people undervalue

• Demerit Good

• Public Good

• Merit Good

A product the government considers people overvalue

• Public Good

• Merit Good

• Demerit Good

It is one in which the government makes most of the decisions on how resources are allocated

• Market Economy

• Mixed Economy

• Planned Economy

Advantages of Planned Economy

Answer explanation

Full Employment Of Resources

Avoidance Of Wasteful Duplication

An Equitable Distribution Of Resources

Consideration Of Externalities

Provisions of Merit Goods and Public Goods

Disadvantages of Planned Economy

Answer explanation

Slow responses to changes in consumer demand

Too much bureaucracy

Lack of incentives

Too much concentration on capital goods