1.4 Resource Allocation in Different Systems

Flashcards about resource allocation in different economic systems.

What determines resource allocation in a market economy?

Interactions of buyers and sellers, guided by supply and demand.

What is the typical role of government in a market economy?

Enforcing contracts, protecting property rights, and addressing market failures.

What are advantages of market economies concerning resource allocation?

Efficiency in allocating resources, innovation, and consumer choice.

What are disadvantages of market economies?

Inequality, market failures, and a focus on short-term profits.

How does a planned economy make decisions?

A central authority (typically the state) makes the key economic decisions.

What is the role of government in a planned economy?

The government owns or controls the primary means of production and distribution.

What are the advantages of a planned economy?

Focus on equality, welfare, and the ability to mobilise resources quickly.

What are disadvantages of planned economies?

Inefficiency, lack of innovation, and resource misallocation.

How does a mixed economy make decisions?

It combines elements of both market and planned economies with government intervention.

What roles do governments and markets play in a mixed economy?

The government regulates certain sectors, provides public services, and may own key industries, while market mechanisms are used in other areas.

What the advantages of a mixed economy?

Balanced approach, flexibility, and stability through government intervention.

What are the disadvantages of a mixed economy?

Potential for government overreach and a complex policy environment.

What are market economies known for, as opposed to planned economies?

Efficiency and innovation, whereas planned economies prioritize equitable resource distribution and welfare objectives.

What is the primary distinction between market and mixed economies?

The government's role – minimal in market economies, more significant and interventionist in mixed economies.

How do mixed economies differ from planned economies?

Mixed economies incorporate elements of free markets, allowing for some level of consumer choice and entrepreneurial freedom.

What is the cornerstone of any economic system?

Resource allocation: how limited resources are distributed among various uses and users.

What guides resource allocation in market economies?

Prices, determined by the intersection of supply and demand.

What is a common criticism of market economies regarding equity?

The distribution of wealth and income can be quite uneven.

What is a common problem for planned economies regarding efficiency?

Inefficiencies due to a lack of competition and profit incentives.

What is the goal of resource distribution in planned economies?

A more equitable distribution via provision for access to healthcare and education.

What is the balancing act in mixed economies?

Combining the efficiency of market systems with the equitable distribution of resources characteristic of planned economies.

What are some challanges of the USA market economy model?

Income inequality, healthcare access, and environmental degradation.

What are some resource allocation challanges with the Planned Economy model?

Inefficiencies, shortages of consumer goods, and lack of innovation due to centralised planning.

What are some key sectors of the United Kingdon's Mixed Economy?

Healthcare (NHS) and education.

What is a challange present in Mixed Economy systems?

Balancing market efficiency with social welfare and public services.

What is a efficiency challange in market economies?

It can lead to the under-provision of public goods and social services.

What is an equity challange in Planned Economies?

The lack of incentives can lead to decreased productivity and innovation.

What is the balancing goal of a mixed economy?

Harness the efficiency of markets while ensuring equitable resource distribution.