Allocation of Resources · 2 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 5% of your exam marks.
New emphasis in the 2027 syllabus; the planned/command economy is no longer in the spec, with the focus now on the market and mixed economic systems. Guidance based on specimen materials.
A is one in which resources are allocated by the , through the free interaction of demand and supply, with little or no . Firms are privately owned and produce whatever is profitable; consumers spend their own incomes as they choose.
In a pure market system the government plays almost no role in production. The three questions are answered automatically by prices (topic 6):
The driving forces are private ownership, the profit motive, and competition between firms.
Discuss whether a market economic system leads to high poverty
What comes up: an 8-mark "Discuss whether or not [a high level of poverty / income inequality] is likely to exist in a market economic system" (or the advantages and disadvantages of a market economic system).
Write (why it might): there may be unemployment, there is no welfare benefit safety net, income inequality is likely, merit goods such as healthcare and education are under-consumed, and monopolies may develop and raise prices.
Write (why it might not): the profit motive and competition can result in low prices, efficiency can raise wages and employment, and responsiveness to consumer demand can raise economic growth, so absolute poverty may stay low.
Watch out: an 8-mark Discuss must give both sides and reach a judgement — a one-sided answer is capped at Level 2 (maximum 5 marks). The judgement can note that the outcome depends on how much the government intervenes.