Section 1: Advantages / Disadvantages Of Market Economies And Planned Economies

Front 1

Consumer sovereignty / resource allocation

Back 1

PE - unwanted goods are overproduced, wanted goods are underproduced – wastage of resources (dis)

ME - (adv) consumers determine what producers produce through purchases – no wastage on unwanted goods

Front 2

Efficiency / degree of wastage

Back 2

PE- -less wastage on unnecessary duplication (of natural monopolies)
-no consumer sovereignty
-no price signals
-bottle necks in complex plans reduce efficiency
-wastage on planning

ME - -see above
-profit encourages efficient resource use
-wastage on duplication
-wastage on advertising etc
-no planning wastage

Front 3

Innovation

Back 3

PE - (dis)no profit motive
plan must be adhered to, ∴unwise to take risks

ME - profit incentive to innovate (lowers production costs = more profit)

Front 4

Flexibility

Back 4

PE - (dis) production is interlinked, plans cannot be adjusted to demand

ME - (adv) market responds quickly to changes in demand

Front 5

Economic freedom

Back 5

PE - (dis) planners decide what is produced – no individual decision possible

ME - (adv) consumers decide what to buy, producers decide what to produce
can make individual decisions

Front 6

Public goods

Back 6

PE- government provision (adv)

ME - no profit can be made from supply – not supplied (dis)

Front 7

Stability / inflation control

Back 7

PE - (adv) fixed prices eliminate inflation
stable economic growth

ME - (dis) optimismboom/inflation
pessimismrecession/unemployment
no steady growth

Front 8

Unemployment

Back 8

PE - (adv) planning ensures jobs for all
overstaffing is a consequence

ME - (dis) unemployment during recession

Front 9

Equality / income distribution

Back 9

PE - adv wages are fixed
income distribution controlled

ME - dis income determined by amount of resources contributed to production
-many resourceshigh income
-few resourceslow income

Front 10

Externalities / environmental damage

Back 10

PE - -in theory no profit motive for external damage/cost
-no private ownership results in environmental damage

ME - -external costs incur no private cost -profit not affected
-private ownership means care of environment

Front 11

Exploitation

Back 11

PE - adv no private profit motive to underpay workers

ME - dis profit – firms want to cut costs
-poor safety standards
-low wages
-high prices in uncompetitive markets

Front 12

Achievement of national goals

Back 12

PE - adv national focus instead of individual focus

ME - dis focus on individual goals

Front 13

Living standards / choice and quality of goods

Back 13

PE- dis -poor quality – plan targets must be met
-wanted goods are scarce

ME - dis -market responds to changes in demand for goods
-competition encourages higher quality