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Which of the following would be considered a disadvantage of allocating resources using a market system?
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Which of the following would be considered a disadvantage of allocatin...
Disadvantages of Allocating Resources using a Market System



  • Inequality: One of the main disadvantages of allocating resources using a market system is that it can lead to inequality. In a market system, resources are allocated based on the ability to pay. This means that those who have more money will be able to buy more goods and services, leaving those who are poor with limited access to resources.


  • Externalities: Another disadvantage of allocating resources using a market system is that it can lead to negative externalities. Negative externalities occur when the production or consumption of a good or service has a harmful effect on third parties who are not involved in the transaction. For example, pollution from a factory may harm the health of those living nearby.


  • Monopolies: A market system can also lead to the formation of monopolies. A monopoly occurs when a single firm dominates the market, and there is no competition. This can lead to higher prices and lower quality goods and services, as the monopoly has no incentive to improve.


  • Instability: A market system can also be unstable. Prices can fluctuate rapidly, leading to uncertainty and risk for both producers and consumers. This can make it difficult for firms to plan for the future and invest in new technologies or products.


  • Short-term focus: Finally, a market system can encourage a short-term focus on profits rather than long-term sustainability. This can lead to overuse of resources and environmental degradation, as firms focus on maximizing profits in the short term rather than considering the long-term impact of their actions.



In conclusion, while a market system can be an effective way of allocating resources, it is not without its drawbacks. It can lead to inequality, negative externalities, monopolies, instability, and a short-term focus on profits. It is important to consider these disadvantages when designing economic policies and to work towards mitigating their impact.
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Features of a Mixed Economy:A mixed economy is an economic system that combines elements of both a market economy and a planned economy. It incorporates features of both private enterprise and government intervention. The correct answer is D, as all of the following features are characteristic of a mixed economy:1. Planned economy:A mixed economy includes elements of a planned economy, where the government plays a role in guiding and regulating economic activities. It formulates economic plans and policies to ensure the efficient allocation of resources and to promote economic stability.2. Dual system of pricing:In a mixed economy, there exists a dual system of pricing, which means that both market prices and government-set prices coexist. While market forces determine prices for most goods and services, the government may intervene to regulate prices in certain sectors to protect consumers or promote social welfare.3. Balanced regional development:Another characteristic of a mixed economy is the emphasis on balanced regional development. The government intervenes to ensure that economic growth and development are not concentrated in specific regions or industries but are spread across different regions and sectors. This helps to reduce regional disparities and promote overall economic stability and social welfare.Benefits of a Mixed Economy:A mixed economy offers several benefits due to its combination of market forces and government intervention. Some of these benefits include:1. Economic efficiency:By incorporating market mechanisms, a mixed economy allows for resource allocation based on supply and demand, which promotes economic efficiency. Market forces encourage competition, innovation, and productivity, leading to higher levels of economic growth.2. Social welfare:Government intervention in a mixed economy enables the provision of public goods and services that may not be adequately provided by the market alone. This includes areas such as healthcare, education, infrastructure, and social security, ensuring a certain level of social welfare and equity.3. Stability and regulation:The government's role in a mixed economy helps to maintain economic stability through macroeconomic policies such as fiscal and monetary measures. It also regulates certain sectors to prevent market failures, protect consumer rights, and ensure fair competition.Conclusion:A mixed economy combines the advantages of both market forces and government intervention. It allows for economic efficiency, social welfare, and stability. The features of a mixed economy include elements of a planned economy, a dual system of pricing, and balanced regional development. These features work together to create a system that promotes both economic growth and social welfare.

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Which of the following would be considered a disadvantage of allocating resources using a market system?
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Which of the following would be considered a disadvantage of allocating resources using a market system? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following would be considered a disadvantage of allocating resources using a market system? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following would be considered a disadvantage of allocating resources using a market system?.
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