1. Define the term “economic system” and “market system”.

The economic system covers the institutions, organizations, and mechanisms in a

country that influence economic behavior and determine how resources are allocated.
A market system is one where many buyers and sellers come together.
2. Identify and describe any THREE (3) differences between market economy and
planned economy.
The market economy is owned by the private sector, planned economy is owned
by the government. The market economy has the freedom to start a business, planned
economy has government regulation. The price of the market economy is dependent
on supply and demand, the planned economy has price control from the government.
3. What is a “mixed economy”? Explain TWO features of Free Economy and TWO
features of Government Intervention that make up mixed economy. [5 mark]
Mixed economy is a system with free markets but also some government
intervention. The two features of free economy are: The production is partly
controlled by both private enterprises; Profit is the main driver. The two features of
command are: Government influences supply and demand through regulation and
interventionist policies; Capital is reallocated based on need, governments use these to
help improve social mobility.

4. Define the term “price mechanism”. What are the THREE features of price
mechanism? [5 marks]
The price mechanism refers to the way in which prices change as demand or
supply changes to reach a new equilibrium position. Prices will rise or fall until
quantity demanded and quantity supplied reach equilibrium. The government can
influence the price mechanism through various policies such as taxes, subsidies, and
price controls. The advantages of the price mechanism include efficient allocation of
resources, the ability to adapt to market changes, and incentives for producers and
consumers.