Slides in this set
1. Free market economy
Completely free market economies (i.e. no government intervention)
Market economies have little of no government input, which means the allocation of
resources replies solely on the demand and supply of consumers and producers.
All resources and raw materials are privately owned by people and firms in a market
economy, this means each business will aim to make as much profit as possible
Wide variety of goods Labour only employed
and services available when profitable to do so
Lots of competition Market may fail to provide
leading to better products important goods and
and cheaper prices services as they are not
Market quickly responds
Consumption of harmful
to consumers wants goods is encouraged.…read more
2. Planned Economy
Economies plan what, how and who to produce goods and services for.
All resources owned and managed by the government
Aim is not profit, it is to provide sufficient goods and services to everybody
Market forces unable to set prices of goods and services
Prices are set at low levels so Consumers wants rarely produced, only
everyone can afford the governments
necessities Very little competition leading to
Distribution of goods tends to shortages in supply
be more fair than market No consumer choice
economy Lack of profit motive may lead to firms
Low level of unemployment
Time and money wasted in
Elimination of waste produced
communication instructions from
by possible competition government…read more
2. Mixed Economy
A mixture between a free market economy and a planned economy allowing the best
of both economic systems to be in one economy.
Allocation of resources done through the wants of consumers with some government
intervention to provide goods and services to those in need.
This economy works best as it relies on what the consumers want however prevents
failure with the help of government intervention.
Advantages: Taxes may be high, reducing incentive
Governments may intervene to in workers, leading to less money for
correct serious market failures consumers to contribute to economy
Wide variety of choice for Public sector provision may be
consumers inefficient, poor quality goods may be
Competition enables better
Government spending may be
quality goods and better prices
politically motivated instead of
concentrating on the consumers…read more
This happens when the resources have not been allocated
sufficiently and fairly in a free or mixed economic system
This is usually because of one of these three things:
· Goods and services are over consumed
· Goods and services are under consumed
· Some necessary goods and services are not produced…read more
Examples of Market Failure
Market dominance by Merit goods are under-
monopolies leading to produced and de-merit
high prices and low goods are over-produced
quality goods. due to the profit
causing social cost of
production to exceed
Positive externalities, In free markets private
when the social benefit sector cannot
exceeds the private (i. profitably supply public
e. hospitals & goods to meet people'
education) s wants…read more
Comparison of 2010/11 and 2007
· Social protection is still the highest sector of
expenditure, because this looks after the public.
· Health is also still the second highest, as it is very
important to look after the population- so they are
healthy to work etc.
· Unfortunately debt has gone up by £12bn, mean the
county is spending even more money than it has.
· Education is the 3rd highest like in 2007. But it has gone
up by £11bn. This is very important because future and
current generation depend on it to create a better
future for the country.
· Overall expenditure has seen an increase of £107bn…read more