Economic Systems: Command Economy vs. Laissez-Faire

WarmerParable avatar

Start Quiz

Study Flashcards

18 Questions

In a traditional command economy, who decides how much of a product is needed?

The government

What is a key feature of a laissez-faire capitalist system?

Limited government involvement

Which economic system is based on the principles of supply and demand?

Capitalist economy

What is a disadvantage of a traditional economy?

It discourages innovation

What is a characteristic of a mixed economy?

Some government involvement

What is a drawback of a command economy?

It leads to economic stagnation

What is a disadvantage of a command economy?

No room for individuality

What is a benefit of a mixed economy?

Provides public goods while allowing private competition

What is a characteristic of a socialist system?

People's basic needs are taken care of

What is a drawback of a capitalist system?

No public goods

What is a benefit of a capitalist system?

High degree of customer satisfaction

What is a disadvantage of a mixed economy?

Always winners and losers

What is the main criticism of capitalism by Karl Marx?

It leads to exploitation of the lower class by the upper class

In a mixed economy, the government's role is to:

Provide public goods and services, and intervene when necessary

What is the main principle of the laissez-faire approach?

The government should provide public goods and services, but not interfere with the economy

What is the main goal of a socialist economy?

Meet people's needs and achieve greater equity

What is the concept that describes individuals acting in their own self-interest, leading to the greater good?

The invisible hand

In a command economy, who plans the entire economy?

The government

Study Notes

Economic Systems

  • Traditional Economy: Based on customs, traditions, and rituals; decisions made on what, how, and for whom to produce are based on these factors.
  • Examples: Amish, some African countries, Australian Aborigines.

Command Economy

  • Government decides what, how, and for whom to produce; everything is predetermined.
  • Examples: North Korea, Cuba, China (formerly).
  • Based on government plans and projections.

Market Economy

  • Based on supply and demand; laissez-faire approach.
  • Examples: US before 1949, Canada, South Korea, Singapore, Great Britain, Germany.
  • Focuses on individual freedom and lack of government interference.

Mixed Economy

  • Combines elements of market and command economies; government involvement in some aspects.
  • Examples: US after 1949, most countries today.
  • Regulates economy to prevent market failure and provides public goods.

Three Main Questions of Economic Systems

  • What will be produced?
  • How will it be produced?
  • For whom will it be produced?

Philosophy of Economic Systems

  • Traditional Economy: Focuses on customs and traditions.
  • Command Economy: Government decides people's needs.
  • Market Economy: Based on individual freedom and lack of government interference.
  • Mixed Economy: Combines elements of market and command economies.

Key Figures

  • Karl Marx: Criticized capitalism, advocated for socialism.
  • Adam Smith: Advocated for laissez-faire approach, believed in the "invisible hand" of the market.

Economic Functions of Government

  • Maintain the legal and social framework.
  • Provide public goods and services.
  • Regulate economy to prevent market failure.
  • Maintain tradition.
  • Provide for education and public health.
  • Decide how much is needed and produced.

Quiz about the advantages and disadvantages of command economies and laissez-faire systems, including their impact on individual freedom, government control, and economic production. Learn about the trade-offs between government-controlled and market-driven economies.

Make Your Own Quizzes and Flashcards

Convert your notes into interactive study material.

Get started for free

More Quizzes Like This

Indian Annual Financial Statement Quiz
15 questions
Philippine Government and Economy
12 questions
Nigeria Government and Economy
8 questions
Use Quizgecko on...