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 plus competition for sales → higher quality goods and services

• resources are allocated efficiently through the law 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 are ignored

• high competition → forms monopolies → exploit workers and consumers

• state the advantages of a command economy

• social equality is prioritised over profit maximisation

• the elimination of consumer and worker exploitation → equal wages and 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

• information gaps between central planners and the people → shortages and surpluses → inefficient allocation of resources