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SingaporeEconomicsQuick questions
The Central Economic Problem
Quick questions on Resource allocation and economic systems explained: H2 Economics
7short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What are the three fundamental questions?Show answer
Because resources are scarce, every economy must answer three questions:
What is the free-market economy?Show answer
In a pure free-market (or laissez-faire) economy, resources are privately owned and allocated entirely by the price mechanism. No central authority directs production; instead, prices act as signals and incentives, and the self-interest of consumers and firms, disciplined by competition, coordinates millions of decisions.
What is the planned economy?Show answer
In a pure planned (or command) economy, the state owns the resources and a central plan answers all three questions. Officials decide outputs, methods and distribution.
What is the mixed economy?Show answer
In practice, almost every economy is mixed: markets allocate most goods and services, but the government intervenes to correct market failure, provide public goods, redistribute income and stabilise the economy. The mix exists because each pure system fails precisely where the other succeeds.
What is q1?Show answer
State the three fundamental economic questions. [2 marks]
What is q2?Show answer
Explain one strength and one weakness of a free-market economy. [3 marks]
What is q3?Show answer
Explain why most economies are mixed rather than pure. [3 marks]
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