Monday 25 May 2009

Disadvantages of these Market Structures

Disadvantages of these economies. *Yes, the IB are pessimistics and more often than not ask for the faults of market structures than the benefits*


























Free Market Economy
Planned Economy
  • over provision of demerit goods (high prices and profits - more in market failure)
  • there will be misallocation of resource (shortages and surpluses exist) as production, investment and trade are too complicated to plan, it is also difficult to predict consumer spending patterns
  • under provision of merit goods (only for those who can afford them)
  • the lack of price systems causes inefficiency
  • unsustainable development (resources used too much, environment polluted as they want to minimise costs and maximise profits)
  • lack of incentives (guaranteed employment and no share of profits) would mean output and quality suffers
  • poor people wouldn't be looked after (orphans, sick and unemployed would suffer more)
  • government control leads to loss of freedom and of choice
  • large firms can monopolise, leading to inefficiency and high prices
  • government may not share

Sorry about the messy table, but my html manipulation skills are limited.

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