Free market, command, and mixed economies

• What are the three different types of economies governments decide from to try to tackle the economic problem of scarcity?

  Free market economies, command economies, and mixed economies
• What are the three main features of free market economies?

  There is a private ownership of resources, market forces determine prices, and producers aim to maximise profits
• How are resources allocated in free market economies?

  Through supply and demand
• What are the three main features of command economies?

  There is a public ownership of resources, the government determines prices, and producers aim to meet production targets set by the country
• How are resources allocated in command economies?

  Through the government
• What is the main feature of mixed economies?

  Resource allocation is a combination of the price mechanism and the government, with this balance being a different degree for different countries
• What were Adam Smith's beliefs?

  He believed in the free market economy
• What were Friedrich Hayek's beliefs?

  He belived in the free market economy
• What were Karl Marx's beliefs?

  He believed in the command economy
• What are the two main advantages of free market economies?

  Consumer spending determines what is produced, and the market can respond quickly to changes in consumer wants
• What are the two main disadvantages of free market economies?

  Inequality between people who own more resources compared to people who own less, and the market can suffer from instability in the case of a recession
• What are the two main advantages of command economies?

  There is more equality as the state can ensure there is a maximum standard of living, and they can also make sure all people are employed
• What are the two main disadvantages of command economies?

  Absence of profit and competition can lead to inneficiency, the state can be slow to react to changes in consumer wants