Economic Systems: Free Market, Command and Mixed Economies

AQA

GCSE

Analysis of the mechanisms by which societies resolve the fundamental economic problem of scarcity. Candidates must evaluate the spectrum of resource allocation systems, ranging from the free market (laissez-faire) mechanism to the command (planned) economy, and the prevalence of mixed economies. Focus lies on the efficiency of the price mechanism versus state planning in addressing 'what', 'how', and 'for whom' to produce, alongside the trade-offs between allocative efficiency and equity.

Objectives

Exam Tips

Pitfalls

Key Terms

Mark Points

What You Need to Demonstrate

Key skills and knowledge for this topic

Award marks for precise definitions of the 'invisible hand' and the three functions of the price mechanism: signalling, rationing, and incentive.
Credit analysis that links the profit motive directly to productive efficiency and consumer sovereignty.
Candidates must explain market failure in free markets, specifically the under-provision of merit goods and non-provision of public goods.
Evaluation must weigh the benefits of state intervention (equity, correction of externalities) against government failure (bureaucracy, inefficiency).

Marking Points

Key points examiners look for in your answers

Award marks for precise definitions of the 'invisible hand' and the three functions of the price mechanism: signalling, rationing, and incentive.
Credit analysis that links the profit motive directly to productive efficiency and consumer sovereignty.
Candidates must explain market failure in free markets, specifically the under-provision of merit goods and non-provision of public goods.
Evaluation must weigh the benefits of state intervention (equity, correction of externalities) against government failure (bureaucracy, inefficiency).

Examiner Tips

Expert advice for maximising your marks

💡In 15-mark questions, use the 'It depends on' rule to evaluate the magnitude of market failure before recommending intervention.
💡Always define 'opportunity cost' when discussing the choice between market and state allocation.
💡Use the specific data provided in Item A/B to contextualize arguments; generic textbook answers are capped at lower levels.
💡Structure evaluation paragraphs by analyzing the short-run efficiency vs long-run equity implications.

Common Mistakes

Pitfalls to avoid in your exam answers

Confusing 'free goods' (zero opportunity cost) with the 'free market' (allocation by price).
Asserting that Mixed Economies are a 50/50 split, rather than a spectrum of intervention.
Failing to explain *how* the price mechanism clears shortages (price rises -> demand contracts/supply extends).
Stating that command economies have 'no money' or 'no wages' rather than state-determined prices.

Key Terminology

Essential terms to know

Likely Command Words

How questions on this topic are typically asked

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