Three basic economic questions face every economy.
Three questions every economy answers
What, and how much?
More hospitals or more cars? How many of each?
How?
With many workers and few machines, or the other way round?
For whom?
Who gets the goods: those who pay most, or those who need them most?
The points to remember
- What, how, for whom: learn them as a set.
- Each country answers them differently.
Free preview
This is the free notes preview
You're reading the free notes. Aimnova Pro unlocks the full study experience — and you can try it with your first topic free to keep:
- FlashcardsLock in vocabulary and key terms with spaced repetition.
- Practice questionsAnswer exam-style questions and get instant AI marking.
- Mock exams & past-paper vaultSit full mocks and see exactly how examiners award marks.
- Personalised study planA daily plan built around your exam date and weak areas.
Someone has to answer the questions: the market, or the government.
The market decides
- Prices signal what buyers want.
- Firms make what earns a profit.
- Goods go to those willing and able to pay.
The government decides
- Planners set what is made.
- The state owns firms and land.
- Goods are shared out by need or by plan.
The points to remember
- Market: prices decide.
- Government: planners decide.
Feeling unprepared for exams?
Get a clear study plan, practice with real questions, and know exactly where you stand before exam day. No more guessing.
How a country mixes the two gives its economic system.
Three economic systems
| System | Who answers the questions | Example |
|---|---|---|
| Free market | Buyers and sellers, through prices | No country is fully free market |
| Planned | The government | North Korea |
| Mixed | Markets for most goods; the state for health, schools, defence | Most countries |
The points to remember
- Pure free markets and pure plans are extremes: real economies are mixed.
- The question is how much the state does.
A mixed economy has two sectors.
Private and public sector
| Sector | Owned by | Examples |
|---|---|---|
| Private sector | Individuals and firms, for profit | Shops, banks, car makers |
| Public sector | The government | State schools, the police, public hospitals |
Memorize terms 3x faster
Smart flashcards show you cards right before you forget them. Perfect for definitions and key concepts.
Paper 2 asked this in May 2025, for 2 marks.
In one country, the private sector now builds most of the roads.
Define the term private sector.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.