11507271
Description
Flashcards by Nikolas Reece, updated more than 1 year ago
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Created by Nikolas Reece
over 6 years ago
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| Question | Answer |
| resource allocation | Resource Allocation is the act of dividing up the scarce resources of the economy to produce different goods and services to meet the needs and wants of society. |
| resource allocation decisions/questions | What to produce? How to produce? For whom to produce? |
| what to produce? | Which products should be manufactured and in what quantities?” |
| how to produce? | This question focuses on the method of production influenced by: • The costs of production • The level of efficiency or productivity • the level of mechanization |
| for whom to produce? (the distribution of goods) | This question determine which consumers will have their needs and wants satisfied by the goods and services made by the economy |
| economic systems | traditional (subsistence) command or planned Market (free market/ capitalist) mixed economy |
| Traditional (subsistence economy) | What to produce? - the people decide based on their needs How to produce? - farming hunting gathering For whom to produce? - make their own products and barter trade |
| Command (planned) economy | |
| market (free market) economy |
Image:
Market (binary/octet-stream)
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| Mixed economy | |
| Advantages of command economy | Even distribution of goods and services. Provides sufficient public and merit goods Low unemployment levels stable economy |
| disadvantages of command economy | No incentives for innovation Few individual choices for consumption Inefficient distribution of goods and service. |
| advantages of (free) market economies | An efficient allocation of scarce resources. competition encourages innovation Freedom of choice Consumer sovereignty |
| disadvantages of (free) market economies | Highly unequal distribution of wealth Public and merit goods under-provided Demerit (harmful) goods over provided No laws to regulate 'unfair or unethical' business activity |
| advantages of mixed economy | - Public goods provided mainly by state and part by private enterprise.. - private enterprise motive of profit is encouraged within the boundaries of social welfare. - efficiency in allocation of resources both private and public seek to provide g&s |
| disadvantages of mixed economy | - The state-run enterprises are inefficient and will waste valuable resources whilst providing welfare for the general public - taxation may seem as a disincentive for private firms especially if it is high |
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