2.1/2.2 Allocating Resources, Economic Systems

What is a free market economy?

all resources allocated by the market with no govt intervention

Features of a Free Market
> Allocation of resources based on d__ & s__
> No __ intervention
> __ sector answers Q’s
> Resources allocated on p__
> High price = __ supply
> Goods & services sold to those __ & able to pay
> u__ = not produced
> __ levels of competition = good for consumer

demand, supply, govt, private, price, high, willing, unprofitable, high

Define economy.

area where people & firms produce, exchange & consume goods/services

Define public good.

essential goods/services used by the public which benefits them

Define merit good.

creates positive effect on society & needs to be consumed more

Advantages of a Free Market
1. E__: high levels of c__ = firms listen to consumers
2. F__ of choice: no govt regulation
3. I__: possibility of making lots of $$

efficiency, competition, freedom, incentive

Disadvantages of a Free Market
1. E__ issues - no consequences to resource depletion
2. Inequality - __ = more choice
3. S__ problems - no govt control = no public goods
> p__ can’t afford education, healthcare
> Only pr__ goods produced

environmental, rich, social, poor, profitable

What is a command/planned economy?

all resources allocated by the govt

Features of a Command/Planned Economy
> __ answers Q’s
> Production based on __ term
> Main belief is e__ - wages paid equally
> Little international __
> S__ist e.g. NK

govt, long, equality, trade, socialist

Advantages of a Command/Planned Economy
1. Prevents w__ - state believes in only producing what is necessary
2. s__ equality - everyone’s basic needs met
3. Economies of s__ - large scale national suppliers of goods/services

wastage, social, scale

Disadvantages of a Command/Planned Economy
1. Lack of f__ - can’t choose career, freedom of movement
2. No i__ to work harder for more pay/status

freedom, incentive

What is a mixed economy?

blend of free market & command

Features of a Mixed Economy
> Govt decides how much to i__
> Govt provides p__ & m__ goods
> Govt exists to redistribute i__ via social welfare
> __ sector = profit motive

interfere, public, merit, income, private

Why would a govt interfere in a market?
> Correct market __
> Earn govt r__ - to provide public & merit goods
> R__ income

failure, revenue, redistribute