mrshearingeconomics
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  • AS level 2015
    • Induction day
    • Year 11 Induction
    • Theme 1 >
      • 1.1 Nature of economics >
        • 1.1.1 Economics as a social science
        • 1.1.2 Positive and normative economic statements
        • 1.1.3 The economic problem
        • 1.1.4 Production possibility frontiers
        • 1.1.5 Specialisation and the division of labour
        • 1.1.6 Free market economies, mixed economy and command economy
      • 1.2 How markets work >
        • 1.2.1 Rational decision making
        • 1.2.2 Demand
        • 1.2.3 Price, income and cross elasticities of demand
        • 1.2.4 Supply
        • 1.2.5 Elasticity of supply
        • 1.2.6 Price determination
        • 1.2.7 Price mechanism
        • 1.2.8 Consumer and producer surplus
        • 1.2.9 Indirect taxes and subsidies
        • 1.2.10 Alternative views of consumer behaviour
      • 1.3 Market failure >
        • 1.3.1 Types of market failure
        • 1.3.2 Externalities
        • 1.3.3 Public goods
        • 1.3.4 Information gaps
      • 1.4 Government intervention >
        • 1.4.1 Government intervention in markets
        • 1.4.2 Government failure
    • Theme 2 >
      • 2.1 Measures of economic performance >
        • 2.1.1 Economic growth
        • 2.1.2 Inflation
        • 2.1.3 Employment and unemployment
        • 2.1.4 Balance of payments
      • 2.2 Aggregate demand (AD) >
        • 2.2.1 The characteristics of AD
        • 2.2.2 Consumption (C)
        • 2.2.3 Investment (I)
        • 2.2.4 Government expenditure (G)
        • 2.2.5 Net trade (X-M)
      • 2.3 Aggregate supply (AS) >
        • 2.3.1 The characteristics of AS
      • 2.4 National income >
        • 2.4.1 National income
        • 2.4.3 Equilibrium levels of real national output
        • 2.4.4 The multiplier
      • 2.5 Economic growth >
        • 2.5.1 Causes of growth
        • 2.5.2 Output gaps
        • 2.5.3 Trade (business) cycle
      • 2.6 Macroeconomic objectives and policies >
        • 2.6.1 Possible macroeconomic objectives
        • 2.6.2 Demand-side policies
        • 2.6.3. Supply-side policies
        • 2.6.4 Conflicts and tradeoffs between objectives and policies
        • Financial Crisis v Great depression
      • Class 2016
  • A level 2016
    • Theme 3 >
      • 3.1. Business Growth >
        • 3.1.1 Sizes and types of firms
        • 3.1.2 Business growth
        • 3.1.3 Demergers
      • 3.2 Business Objectives >
        • 3.2.1 Business objectives
      • 3.3 Revenue, Costs & Profits >
        • 3.3.1 Revenue
        • 3.3.2 Costs
        • 3.3.3 Economies and diseconomies of scale
        • 3.3.4 Normal profits, supernormal profits & losses
      • 3.4 Market Structures >
        • 3.4.1 Efficiency
        • 3.4.2 Perfect competition
        • 3.4.3 Monopolistic competition
        • 3.4.4 Oligopoly
        • 3.4.5 Monopoly
        • 3.4.6 Monopsony
        • 3.4.7 Contestability
      • 3.5 Labour market >
        • 3.5.1 Demand for labour
        • 3.5.2 Supply of labour
        • 3.5.3 Wage determination in competitive and non-competitive markets
      • 3.6 Government intervention >
        • 3.6.1 Government intervention
        • 3.6.2 The impact of government intervention
    • Theme 4 >
      • 4.1 International economics >
        • 4.1.1 Globalisation
        • 4.1.2 Specialisation & Trade
        • 4.1.3 Pattern of trade
        • 4.1.4 Terms of trade
        • 4.1.5 Trading blocs & WTO
        • 4.1.6 Restrictions on free trade
        • 4.1.7 Balance of Payments
        • 4.1.8 Exchange Rates
        • 4.1.9 International Competiveness
      • 4.2 Poverty and inequality >
        • 4.2.1 Absolute & Relative Poverty
        • 4.2.2 Inequality
      • 4.3 Emerging and developing economies >
        • 4.3.1 Measures of development
        • 4.3.2 Factors influence growth & dev
        • 4.3.3 Stratergies for growth & dev
      • 4.4 The financial sector >
        • 4.4.1 Role financial markets
        • 4.4.2 MF in Financial markets
        • 4.4.3 Role of Central Banks
      • 4.5 Role of the state in the macroeconomy >
        • 4.5.1 Public expendicture
        • 4.5.2 Taxation
        • 4.5.3 Public sector finances
        • 4.5.4 Macro policies
  • Class List
    • Year 12
    • Year 13
ILO:

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

Command Economy v Free Market Economy

What are the advantages & disadvantages of either system?
I, Pencil: The Movie
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Who was to blame for the financial crisis? - BBC News        
Command economy examples:
Why Cuban cab drivers earn more than doctors
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How's Socialism Doing in Venezuela?         
Venezuela's currency crisis explained         

Adam Smith

Smith argued that economies function most efficiently and fairly when individuals are allowed to pursue their own interests; the great threat to economic growth is government intervention.
Additional reading:
​When Pepsi was swapped for Soviet warships
Explain how a fall in demand for CD music systems would lead to fewer resources being allocated to the production of this good in a market economy.

Karl Marx

Marx considered the flaws of free market economies; he argued that the free market economy would break down because the owners of business made huge profits at the expense of workers.
The World According To Marx
Activity:
 
Compare the difference between Adam Smith and Karl Marx in this students video.
How would Karl Marx's philosophy be evident in the Kaiser Chiefs song "factory gates"?
Related articles:

Melvyn Bragg and guests discuss Karl Marx. "Workers of the World Unite! You have nothing to lose but your chains", 
Marx's theory on labour still has capital


Question:
What problem would Karl Marx attach to capitalism?
How big a problem is this in your opinion? Justify your answer. 
 
Question:
The end of the 20th century saw the general collapse of communism. 
Identify the reasons why communism in practice had major weaknesses as an economic system.

Friedrich Hayek

Hayek was critical of command economies; he was concerned about the information required to distribute resources effectively and argued it was impossible for the government to process this information effectively.
Masters of Money: Friedrich Hayek
"The Road To Serfdom" Hayek's 
Radical Economics: Yo Hayek!

Evaluation:

Most economists would argue that free markets are the most efficient (in terms of using resources in the best possible way to meet the needs and wants of consumers). However, when equity is considered, most economists would also argue that free markets lead to an unequal distribution of income and wealth, since owners of capital and entrepreneurs tend to accumulate the most income/wealth and many people, such as the sick or elderly, are unable to work. As a result, most economies today are mixed economies, where markets allocate many resources, but governments intervene to different extents in order to ensure a minimum standard of living and to correct other market failures.

Governments intervene by raising revenue through taxes and redistributing income in the form of benefits and direct provision of services such as healthcare.
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