IGCSEEconomicsCambridge (CIE)Exam Questions2. The Allocation of Resources2.9 Market Economic System

Market Economic System (Cambridge (CIE) IGCSE Economics)

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2.9 Market Economic System

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2.9 Market Economic System

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1
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In Tunisia, resource allocation decisions are made by both the public sector and private sector as it is a mixed economy.  Tunisia’s GDP increased from 2014 to 2018 but its households saved less. Income levels can be  affected by changes in trade union activity and the foreign exchange rate. From 2014 to 2018, Tunisia experienced a number of strikes organised by its largest trade union, the Tunisian General  Labour Union. There was also a significant fall in its foreign exchange rate.

Define mixed economy

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2
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The US operates a mainly market economic system. Life expectancy in the US fell in 2017, for the  third year in a row. Although the US has a high GDP per head, it also has a high level of income inequality. The poor benefited from the US’s low and stable inflation rate. The government’s  supply-side policy measures were partly responsible for reducing inflationary pressure

Define market economic system

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3
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Singapore is a high-income country with a shortage of land and labour. Singapore is often given as an example of a market economy which encourages competition and innovation. The Singaporean government does, however, intervene  in the economy. For example, it encourages its population to eat two servings of fruit and two servings of vegetables per day

Identify two advantages of a market economy

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4
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The US operates a mainly market economic system. Life expectancy in the US fell in 2017, for the  third year in a row. Although the US has a high GDP per head, it also has a high level of income inequality. The poor benefited from the US’s low and stable inflation rate. The government’s  supply-side policy measures were partly responsible for reducing inflationary pressure

Identify two characteristics of a market system

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5
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Sweden has a mixed economic system. In 2018, it was operating at a point inside its production possibility curve (PPC). In 2018, the country’s schools employed nearly 2500 extra teachers. A few  of these had previously been actors. A higher number had previously been government officials involved with regulation of Swedish monopolies.

Identify two characteristics of a mixed economic system 

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14 marks

The use of supply-side policy measures, including deregulation, is moving China closer to a market economic system. Some supply-side policy measures, such as education and subsidies, can also increase a country’s economic growth rate. China joined the World Trade Organisation in 2001 and has since removed some quotas on imports and reduced some import tariffs. These measures may influence the size of its current account surplus.

Explain two benefits consumers may gain from a market economic system.

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2
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The use of supply-side policy measures, including deregulation, is moving China closer to a market economic system. Some supply-side policy measures, such as education and subsidies, can also increase a country’s economic growth rate. China joined the World Trade Organisation in 2001 and has since removed some quotas on imports and reduced some import tariffs. These measures may influence the size of its current account surplus.

Explain two characteristics of a market economic system

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3
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Non-renewable energy (e.g. coal) is thought to cause a higher social cost than renewable energy (e.g. solar or wind power). Excessive demand for non-renewable energy causes a failure of the market economic system. However, producers of renewable energy, some of which specialise in one form of energy, are beginning to produce on a larger scale. 

Explain two disadvantages of a market economy

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4
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Non-renewable energy (e.g. coal) is thought to cause a higher social cost than renewable energy (e.g. solar or wind power). Excessive demand for non-renewable energy causes a failure of the market economic system. However, producers of renewable energy, some of which specialise in one form of energy, are beginning to produce on a larger scale. 

Explain two advantages of a market economy

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18 marks

Non-renewable energy (e.g. coal) is thought to cause a higher social cost than renewable energy (e.g. solar or wind power). Excessive demand for non-renewable energy causes a failure of the market economic system. However, producers of renewable energy, some of which specialise in one form of energy, are beginning to produce on a larger scale. 

Discuss whether or not the operation of a market economic system is harmful to an economy.

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28 marks

Botswana has a number of conservation projects. These are thought to provide a social benefit to local communities. Botswana has a mixed economic system with tax revenue as a percentage of GDP at 27% in 2017. Some Botswanan economists suggest that the country should move towards a market economic system, taking care to avoid market failure.

Discuss the advantages and disadvantages of a market economic system.

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36 marks

Discuss whether or not a market system benefits consumers.

Refer to the source material in your answers.

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