1. Theme 1: Introduction to markets and market failure
In this theme, students will consider how markets work, looking at how supply and demand interact to allocate resources in local, national and international markets. They will learn how to apply supply and demand analysis to real-world situations and be able to offer explanations of consumer behaviour. This will involve looking at both how consumers act in a rational way to maximise utility and how
firms maximise profit, but also why consumers may not behave rationally.
1.1 Nature of economics
Subject content
1.1.6 Free market economies, mixed economy and command economy
What students need to learn:
a) The distinction between free market, mixed and
command economies: reference to Adam Smith,
Friedrich Hayek and Karl Marx
b) The advantages and disadvantages of a free market
economy and a command economy
c) The role of the state in a mixed economy

2. Who are the economic actors?
Economic Systems
 ’An economic system is best described as a network of organisations used by a society to resolve the basic problem of what, how much, how and for whom to produce.’
Who are the economic actors?
Individuals
Groups
Government

3. How are resources allocated?
The market mechanism
Allocates resources through bringing together buyers and sellers who agree on a price for the product or resource being sold.
Planning
Allocates resources through administrative decisions e.g. the government and NHS

4. Free market economy

5. Jot down some problems that the UK may face in a completely free market economy? Where the government has no intervention.

6. ADVANTAGE OR DISADVANTAGE OF THE FREE MARKET ECONOMY
PRICES SHOULD BE LOWER
ADVANTAGE
DISADVANTAGE

7. ADVANTAGE OR DISADVANTAGE OF THE FREE MARKET ECONOMY
SOME BUSINESSES MAY MONOPOLISE A MARKET
ADVANTAGE
DISADVANTAGE

8. ADVANTAGE OR DISADVANTAGE OF THE FREE MARKET ECONOMY
CONSUMERS MAY NOT BE ABLE TO AFFORD VITAL PRODUCTS
ADVANTAGE
DISADVANTAGE

9. ADVANTAGE OR DISADVANTAGE OF THE FREE MARKET ECONOMY
QUALITY SHOULD BE HIGH DUE TO COMPETITION
ADVANTAGE
DISADVANTAGE

10. Command Economies
allocation of scarce resources by government, or an agency appointed by the government.

11. North Korea

12. Mixed economies http://youtu.be/KOCxJRwasSo
This involves a combination of market forces and central planning, called mixed economies

13. What type of economy does the UK have? Why? Explain...

14. APPLICATION/ANALYSIS (C/B) APPLICATION/ANALYSIS (C/B)
Government's view of the economy could be summed up in a few short phrases If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.
– Ronald Reagan
KNOWLWDGE (C)
APPLICATION/ANALYSIS (C/B)
APPLICATION/ANALYSIS (C/B)
PUT YOUR THINKING HATS ON…
KNOWLEDGE (C)
AO4: EVALUATION (A/A*)
EVALUATION (A/A*)

15. Evaluation of different types of economy
Choice
Economic growth
Quality & innovation
Distribution of income & wealth
Efficiency
Risk
Political freedom