Theory question 104
Economic Systems(a) Define economic system.
(b) Distinguish between a capitalist economy and a socialist economy under the following: (i) aim of production; (ii) consumer sovereignty; (iii) competition.
(c) State three features of land as a factor of production.
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(a) An economic system is the way a society organises the ownership and use of its resources to decide what, how and for whom to produce.
(b)(i) Aim: capitalism – profit; socialism – social welfare of all citizens.
(ii) Consumer sovereignty: capitalism – consumers' spending decides what is produced; socialism – the state planners decide, so consumer sovereignty is limited.
(iii) Competition: capitalism – many firms compete; socialism – little or no competition as the state controls production.
(c) Any three: fixed in supply; free gift of nature; geographically immobile; subject to diminishing returns; varies in fertility/quality; its reward is rent.
Compare both systems point by point.