ECONOMIC SYSTEMS

• What are public goods characterized by?

  Public goods are non-rivalrous and non-excludable.
• What does it mean for a good to be non-rivalrous?

  It means that one person's consumption of the good does not reduce the amount available for others.
• What is an example of a non-excludable good?

  Street lights are an example of a non-excludable good.
• Who typically provides public goods?

  The government typically provides public goods.
• What are merit goods?

  Merit goods are goods or services that are beneficial to society.
• What are demerit goods?

  Demerit goods are goods or services that are socially undesirable due to perceived negative effects.
• What is an externality?

  An externality is a cost or benefit incurred by a third party not directly involved in an economic transaction.
• What does the free market rely on to solve economic problems?

  The free market relies on the price mechanism to solve economic problems.
• How do supply and demand affect the market?

  Supply and demand determine the price and quantity of goods and services.
• What is a characteristic of a competitive market?

  A competitive market is profit-driven.
• What is one advantage of a free market?

  One advantage of a free market is consumer choice.
• What is a disadvantage of a free market?

  A disadvantage of a free market is little regulation, which can lead to monopolies.
• What is a command or planned economy?

  A command or planned economy is one where the government controls all aspects of the economy and economic production.
• How are resources allocated in a command economy?

  Resources are allocated by the government in a command economy.
• What is one advantage of a command economy?

  One advantage of a command economy is greater equality among citizens.
• What is a disadvantage of a command economy?

  A disadvantage of a command economy is that it does not respond to consumer preferences.
• What is a mixed economy?

  A mixed economy is one where both the government and private sector run businesses and intervene in certain areas of the economy.
• What is one role of the government in a mixed economy?

  One role of the government in a mixed economy is to provide a safety net for citizens.
• How does a mixed economy address negative externalities?

  A mixed economy can regulate markets to reduce negative externalities.
• What is one function of government regulation in a mixed economy?

  Government regulation in a mixed economy can control macroeconomic variables, such as inflation.
• What are the advantages and disadvantages of a free market?

  Advantages:

  • Competitive market
  • Consumer choice
  • Encourages innovation
  • Productive efficiency

  
  

  Disadvantages:

  • Little regulation
  • Provision of public goods
  • Control of negative externalities
  • Inequalities in wealth
• What are the advantages and disadvantages of a command economy?

  Advantages:

  • Greater equality
  • Control of merit/demerit goods
  • Government can create a society that maximizes social welfare
  • Ensures access to basic necessities

  
  

  Disadvantages:

  • Lack of responsiveness to consumer preferences
  • Poor information about production needs
  • Lack of democracy
• What are the roles of a mixed economy?

  Roles:

  • Run most businesses by the private sector
  • Government intervention in certain areas
  • Provide a safety net
  • Reduce negative externalities
  • Provide a legal framework
  • Encourage free trade
  • Regulate markets to reduce consumer exploitation
  • Control macroeconomic variables