Economic Objectives and Economic Systems. AS Economics. Aims and Objectives. Aim Understand economic objectives and economic systems. Objectives Define different agents’ objectives in an economy. Describe how these objective are competing. Analyse different types of economic systems.
Economic Objectives and Economic Systems
Understand economic objectives and economic systems.
Define different agents’ objectives in an economy.
Describe how these objective are competing.
Analyse different types of economic systems.
A new high speed train line is planned to be built from Leeds to London.
It would mean the creation of a new line and state of the art station which would include a new shopping centre. However it would result in the demolition of the villages of Barton Le Clay and Toddington.
Economic agents often have different, conflicting opinions and objectives.
Decisions about the allocation of resources will need to take into account these objectives and conflicts.
Whether the government intervenes to allocate resources depends on the economic system.
1989 Signalled the end of Communism
Resources are allocated by the command mechanism (i.e. the government).
All decisions about what and how much and who should produce goods/services are taken by government.
Only exist in a dictatorship government.
Consumers had to queue to buy goods, whose prices were fixed by governments, resulting in shortages and poor quality goods.
Command economies broke down.
Still exist: China, North Korea, Cuba.
Resources are allocated by the price mechanism and market forces.
Allocates scarce resources among competing uses.
Market could be anything from a street market, to buying goods and services online, to markets such as eBay!
One example would be labour, exchanged for cash, as different prices.
As oil prices increase, motorists would spend more money on petrol and be tempted to ration the amount of journeys, cutting demand for petrol.
Oil companies are incentivised to increase supply by developing oil fields.
High market price has signalled new firms should enter the markets.
What were the problems being experienced in Cuba’s command economy?
Why might small changes be happening to Cuba’s economy?
What may be the benefits and drawbacks of Cuba changing from a command to a market economy?