b) Advantages and disadvantages

• state the advantages of a free market economy

• profit incentive motivates people to work or establish firms

• a greater variety of goods and services + competition for sales → higher quality goods and services

• resources are allocated efficiently through the laws of supply and demand

• state the disadvantages of a free market economy

• concentration of wealth among the few → increased class inequality

• firms may lower product quality to increase profits

• resource depletion and environmental damage may be ignored

• high competition → forms monopolies → workers and consumers become exploited

• state the advantages of a command economy

• social equality prioritised over profit maximisation

• elimination of consumer and worker exploitation → equal wages + little to no unemployment

• resources can be allocated to urgent priorities

• state the disadvantages of a command economy

• equal wages → no incentive to acquire difficult qualifications for highly skilled careers

• no competition → less innovation and product development

• excessive government intervention → inefficient allocation of resources