The (Free) Market System | Economics for GCSE/IGCSE - Year 11 PDF Download

Definition & Characteristics

• Free Market Economy: This economic system, also known as a free market economy, is characterized by minimal government intervention in economic activities. While no purely free market economy exists globally, some countries have lesser government involvement compared to others.
• Less Government Intervention: Refers to the degree to which the government involves itself in economic activities within a country. Countries with less government intervention typically allow market forces to play a more significant role in determining economic outcomes.
• Types of Economies: Economies can be classified as market, mixed, or planned based on how they answer the three fundamental economic questions. These questions ultimately determine the level of government intervention in an economy.
  • Three Economic Questions: These questions pertain to what to produce, how to produce, and for whom to produce. The answers to these questions shape the economic system of a country.
  • Amount of Government Intervention: The extent to which the government involves itself in economic activities, such as regulating prices, providing public goods, and implementing policies to address market failures.

• North Korea operates as a planned economy.
• The United States, Japan, and Singapore function as mixed economies but with comparatively lesser government intervention than countries like Norway, Germany, or China.

Characteristics of a Market System

Advantages & Disadvantages of a Market System

• Every economic system comes with various benefits and drawbacks.