1.1.6 Free Market Economics, Mixed Economy and Command Economy

Free market economy meaning?

A free market economy refers to an economic system in which prices are determined by supply and demand with no government intervention.

Mixed economy meaning?

A mixed economy is a combination of a free market economy and a command economy.

Command economy meaning?

A command economy is when recourses are allocated by state.

What is a command economy? E.g.)

Fully Government Control e.g. North Korea

What is Mixed Economy e.g.?

Partial Market forces and partial government control/Intervention public involvement.

What is Free Market Economy e.g.?

No government control the economy is only determined by the market forces of supply and demand. E.g? Closet (USA).

Adam Smith "Invisible Hand"?

In a Free Market economy if recourses aren't allocated correctly (Excess supply or demand) the market will automatically adjust itself.

Free Market (advantage)?

• Enterprise making their products cheaper for more customers.

• Economic growth

• Consumer Confidence

Free Market (disadvantage)?

• Little regulation

• The quality of the enterprise products will be bad.

• Provision of demerit (danger) goods.

What did Friedrich Hayek?

Hayek believed that the state had a role to play in creating a 'safety net' such as social insurance e.g. NHS to support workers in times of need e.g. unemployment.

What did Karl Mark believe?

• Karl Marx believed that labour was exploited by capitalism. E.g. command economy.