Free Market Economy - what it is, advantages and disadvatages,
Command Economy - what it is, advatages and disadvantages
Mixed Economy - what it is, advatages and disadvantages
Economic systems
Karl Marx and his beliefes
Adam Smith and his beliefes
Friedrich Hayek and his beliefes
Free Market Economy:
◦Economy is controlled completely by the price(market) mechanism, with no government
intervention
◦E.g supply and demand controlling the price of goods
◦USA can be called a free market economy
◦Advantages:
‣ Business incentive to innovate
‣ Lots of employment opportunity
‣ Desire to work hard
‣ Controlled by the consumer, so is in the consumers best interests
‣ Good quality of goods
‣ Encourages entrepreneurs to take risks
‣ High e ciency
◦Disadvantages:
‣ Lack of bene ts spending
‣ May lose external bene ts of education and healthcare
‣ Increased inequality
Command Economy:
◦Resources are allocated completely by the government by a process called planning
◦China is the largest command economy
◦Advantages:
‣ Low inequality - equal distribution of income
◦Disadvantages:
‣ Low incentive to innovate
‣ No desire to work hard
‣ Lack of choice
‣ Low incentive to take risks
‣ Low e ciency
Mixed Economy:
◦Government intervenes to o set the negative e ects of a free market economy
◦E.g providing education, welfare bene ts and healthcare
◦Most developed countries are mixed economies, for example UK
Economic Systems:
◦Resource allocation has three dimensions:
‣ What is to be produced?
‣ How is it going to be produced?
‣ For whom is it going to be produced?
◦Within an economy system there are various ‘actors’:
‣ Individuals
‣ Groups
‣ Government
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller belenkii04. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £9.49. You're not tied to anything after your purchase.
