ECONOMIC SYSTEMS N.P.

ECONOMIC SYSTEMS Free Market Economy All resources are owned privately. - economy is governed by supply and demand, without any interference by the state; - there is no government control over land, capital or labour. N.P.

ECONOMIC SYSTEMS Free Market Economy Advantages: Business competition (= low prices) Consumers’ freedom to choose products Low taxes People are encouraged to set up businesses N.P.

Economic Systems Free Market Economy Disadvantages: Businesses can create monopolies to control market prices The government doesn’t provide any goods or services (i.e. education, health) The government doesn’t interfere with economy: this can lead to uncontrolled booms and recessions. N.P.

Economic Systems Planned Economy All planning and direction of economic activity is done by the government or the state. The state decides the products to produce and their quantity, who to employ and how much they will be paid; There might be no private property; Examples: Russia before 1989; partly China. N.P.

Economic Systems Mixed Economy It combines elements of both a free market economy and a planned economy with two sectors: - Private sector: businesses not controlled by the government/state; - they choose what goods to produce and how much to charge for them. N.P.

Economic Systems Public sector: state-owned or controlled industries and organisations: some services are offered to the consumer without any charge; the state pays for these services by charging taxes ( i.e. defence, police, transport and education). N.P.

Economic Systems Privatisation In many countries with a mixed economy there has been great changes: - governments have sold off state businesses to private enterprises (i.e. water supply, public transport). N.P.

Economic Systems Discussion: from the consumers’/workers’viewpoint, discuss the advantages and disadvantages of: free market economies planned economies privatisation N.P.