Free Market Economy

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LO2.1 Explain how economic systems attempt to allocate and make effective use of scarce resources effectively

Free market economy: sometimes called capitalism.in this type.in this type of economy most decisions are taken through the operation of the market mechanism . Supply and demand and to pay influence decision making. There is very little government intervention in business decision” (BPP, 2007, pp. 138-170), (Doc.mbalib.com. 2013)

Command economy:” it is refered to as state controlled .in this type of economy decisions are taken collectively, usually by centrall planning commitees.the government controles what is produced ,gow much is produced the price and who the goods are available to.decisions are intended to benefit all members …show more content…

free market economies are very competitive. A lot of their industries are thought to be almost perfect competitive , production efficiency will hapen. free market economies distribute their resources more efficiently.
Choice. Companies will produce whatever consumers are prepared to buy. the consumer is sovereign., there are no restrictions on what the firms can produce. there will be a bigger choice of services and goods in a free market economy compared with a command economy.
Innovation. companies will be looking to produce something new to get ahead of their competitors.. there are no incentives for the busineses to be innovative. As long as they produce the essentials the planners will be happy.
Higher economic growth rates.. The most successful economy in the world (in terms of size) has been the USA, and they have been one of the freest economies in the …show more content…

Mixed economy:”in this tipe of economy there is a balance between market forces and state intervention.the view is taken that certain activities need to be regulated by the state while others can be left to the influence of the market.a mixed economy usually comprises:
• Afree enterprise sector,where economic decizions are based on market forces
• Public ownership and control of key centrall industries
• Welfare sector to provide a minimum level of medical , social and educational services for all citizens regardless of wealth.” (BPP, 2010, pp. 138-170), ), (Doc.mbalib.com. 2013)

Transitional economy:” A transition economy is one that is changing from central planning to free markets. Since the collapse of communism in the late 1980s, countries of the former Soviet Union, and its satellite states, including Poland, Hungary, and Bulgaria, sought to embrace market capitalism and abandon central planning. However, most of these transition economies have faced severe short-term difficulties, and longer-term constraints on development.” (Economicsonline.co.uk, 2013), ), (Doc.mbalib.com.

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