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4. (a) Free Enterprise (Laissez Faire) and a Command Economy (Central Planning) are examples of economic systems - Leaving Cert Economics - Question 4 - 2007
Question 4
4. (a) Free Enterprise (Laissez Faire) and a Command Economy (Central Planning) are examples of economic systems. (i) Explain each of the underlined terms. (ii) In... show full transcript
Worked Solution & Example Answer:4. (a) Free Enterprise (Laissez Faire) and a Command Economy (Central Planning) are examples of economic systems - Leaving Cert Economics - Question 4 - 2007
Step 1
Explain each of the underlined terms.
Answer
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Free Enterprise (Laissez Faire): This economic system emphasizes minimal government intervention in business activities. Decisions regarding production, investment, and distribution are primarily made by private individuals and companies. The market operates largely on supply and demand, allowing resources to be allocated through a pricing mechanism.
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Command Economy (Central Planning): In a command economy, the government exerts significant control over economic activities, determining what goods should be produced, in what quantities, and at what price. This system aims to achieve specific societal goals, often prioritizing equality over efficiency.
Step 2
In relation to any ONE of the economic systems above, outline TWO possible economic advantages and TWO possible economic disadvantages.
Answer
Economic System Chosen: Free Enterprise (Laissez Faire)
Economic Advantages:
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Choice: Consumers have the freedom to select from a wide variety of goods and services, fostering competition among producers.
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Efficiency: Since producers operate in a competitive market, they are incentivized to reduce costs and innovate, leading to better products and services.
Economic Disadvantages:
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Distribution of income/wealth inequities: The free market may lead to significant disparities in wealth and access to resources, causing social disparity.
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Lack of essential public services: In a system focused mainly on profit, key services such as healthcare and education may not be sufficiently provided.
Step 3
Outline FOUR examples of economic activity in the Irish economy to support this view.
Answer
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Existence of Semi-State Bodies: Organizations such as Bord na Móna operate alongside private enterprises, contributing to energy production and environmental management.
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Government Departments and Various Regulators: The Irish government regulates critical economic activities through bodies like the Central Bank, ensuring market stability.
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Legislation: Laws that govern minimum wage and consumer protection reflect mixed economic models aimed at safeguarding both workers and consumers.
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Use of taxation: Government tax policy is used to promote social welfare, ensuring the provision of essential services such as education and healthcare.
Step 4
Do you consider that the Irish economy is moving towards more free enterprise or towards more central planning in recent years? Explain your answer, using appropriate examples.
Answer
In recent years, the Irish economy appears to be moving towards more free enterprise. Evidence for this includes the gradual deregulation of various industries, such as telecommunications and healthcare, allowing more private participation and competition. Moreover, government initiatives to encourage entrepreneurship, through supports like grants and reduced regulation, have contributed to a vibrant start-up culture.
Conversely, there is also a trend towards increased central planning, particularly in areas such as housing and health services, where government intervention has become necessary due to market failures. For instance, government-led housing schemes are addressing the shortage of affordable homes, indicating a response to economic imbalances.
Overall, while elements of central planning are evident, the stronger inclination towards free enterprise seems to characterize the current trajectory of the Irish economy.