A Mixed Economy Allocates Resources Through

Question: Economic system
Answer: A complex network of individuals, organisations and institutions and their social and legal interrelationships which allocates resources.
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Question: Individuals
Answer: Consumers and workers, who may own factors of production that they supply for production purposes
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Question: Groups
Answer: Firms, trade unions, political parties, families, and charities and similar, which exist as agents in the economic system
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Question: Government
Answer: Ranging from councils and police forces to national and supernational bodies that exercise power and influences the relationship between individuals and groups.
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Question: Market mechanism
Answer: Allocation of resources and deciding of price via the bringing together of buyers and sellers.
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Question: Planning mechanism
Answer: Allocation of resources through administrative decisions
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Question: Free market economy (aka capitalist, market, free enterprise economy)
Answer: An economic system that resolves the basic economic problems mainly through the market mechanism.
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Question: Mixed economy
Answer: An economy where both the free market mechanism and the government planning process allocate significant proportions of total resources.
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Question: Command economy (aka planned, centrally planned economy)
Answer: An economic system where government, through a planning process, allocates resources in society.
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Question: Adam Smith economic system opinions
Answer: - Free market economist (partly mixed)
- Invisible hand of market
- Advocated defense of workers by state
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Question: Karl Marx economic system opinions
Answer: - Command economist
- Advocated putting means of production in hands of proletariat
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Question: Friedrich Hayek economic system opinions
Answer: - Free market economist
- Disliked government control, as he believed it led to lack of individual freedom
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Question: Advantages of free market economy
Answer: - Efficient -> produce in most cost efficient way to satisfy the wants of society and supply demand according to prices - markets know what consumers want better than markets
- Ensures state does not get too large - seen as necessary to freedom by some
- Liberal -> allows free will in purchases (consumer sovereignty).
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Question: Disdvantages of free market economy
Answer: - Lack of equity/fairness - rich get benefits of factors of production
- Possibility of self-interest to not coincide with the interest of the masses (e.g. like in Marxism, or game theory).
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Question: Advantages of command economy
Answer: - Arguably enables the government to overcome market failure, inequality and create a society that maximises social welfare rather than maximises profit.
- Can prevent abuse of monopoly power.
- Can prevent mass unemployment, often a feature of capitalist economies.
- Could produce goods which benefit society and ensure everyone has access to basic necessities.
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Question: Disdvantages of command economy
Answer: - Government agencies usually have poor information about what to produce. Centralisation means that decisions are taken by people who may have no access to what is actually happening. Command economies, like the Soviet Union often produced goods that weren't used.
- Unable to respond to consumer preferences
- Threat to democracy and liberty. A command economy creates a very powerful government which limits individuals rights to pursue economic objectives. This invariably creates a climate where governments can extend their control into other areas of people's lives.
- Bureaucratic. Command economies tend to be very bureaucratic with decisions held up by planning and committees.
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Question: Role of the state in a mixed economy
Answer: Provides welfare benefits: state pensions, unemployment and sickness benefits, chiled benefits, healthcare etc.
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