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04/12/2025
Economics
1.1.6 - Free,mixed and command economies
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4 Dec 2025
•
Understanding Free, Mixed, and Command Economies - Edexcel Economics A Notes
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@aimee_mqfw
1 / 4
Free Market Economy Fundamentals
You've probably heard politicians argue about "letting the market decide" - this is the free market economy in action. In this system, individuals own businesses and make their own choices without government interference, with prices determining what gets produced based on what people are willing to buy.
Adam Smith, an 18th-century economist, famously described the "invisible hand" that guides free markets. He believed that when everyone pursues their own self-interest through competition, it magically benefits society as a whole by keeping prices low and ensuring the right goods get produced.
Here's the catch though - no country today operates a completely free market. Governments always step in to issue currency, protect property rights, and prevent monopolies from taking over entire industries.
Quick Fact: Even the most capitalist countries like the USA still have significant government involvement in their economies!
Free Market: Benefits and Problems
Friedrich Hayek, another influential economist, argued that government control destroys personal freedom and that even poor people in free market countries live better lives than those under state control. He believed individuals know their own needs better than distant government planners.
The advantages of free markets are pretty appealing: you get freedom of choice, high motivation (work hard, earn more), and efficient production that keeps costs down. Countries with freer markets typically experience faster economic growth too.
But there are serious disadvantages to consider. Free markets create massive inequality, fail to provide important services like education and healthcare adequately, and can lead to monopolies that exploit consumers. They also struggle with environmental problems since businesses focus on profit rather than protecting nature.
Reality Check: Even supporters of free markets admit they need some government regulation to function properly!
Command Economy System
Imagine if the government owned every business and decided what job you'd do - welcome to a command economy. In this system, the state controls all factors of production (except people) and makes virtually every economic decision, often prioritising national goals over individual wants.
Karl Marx championed this approach, arguing that capitalism exploits workers by underpaying them whilst owners get rich. He envisioned a society where everyone would own everything collectively and income differences would disappear completely.
Command economies do offer some benefits: they guarantee everyone a minimum standard of living, avoid wasteful advertising and duplicate services, and can focus on long-term national planning without worrying about short-term profits.
However, the disadvantages are severe. These systems often produce too much of some goods and not enough of others, decision-making becomes painfully slow, and people lose motivation when everyone earns the same wage regardless of effort.
Historical Note: Most command economies like the Soviet Union eventually collapsed due to these fundamental problems!
Mixed Economy: The Middle Ground
Most countries today, including the UK, operate mixed economies - a blend of free market mechanisms and government planning. Typically, governments control 40-60% of economic activity whilst leaving the rest to private businesses and market forces.
In mixed economies, governments play four key roles: they create rules to prevent monopoly abuse and protect consumers, provide essential services like emergency response and transport, redistribute wealth through taxes and benefits, and try to stabilise the economy during boom and bust cycles.
This system attempts to capture the benefits of both approaches whilst minimising their worst features. You get the innovation and efficiency of free markets combined with the stability and social protection that government involvement provides.
The exact balance varies dramatically between countries - Scandinavian nations have more government involvement than the United States, but both are considered mixed economies.
UK Example: The NHS represents government provision of healthcare, whilst most shops and restaurants operate as private businesses in the free market!
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THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
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Paul T
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The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
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Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
Understanding Free, Mixed, and Command Economies - Edexcel Economics A Notes
AJW
@aimee_mqfw
Ever wondered why some countries let businesses do whatever they want whilst others have the government controlling everything? Understanding free market, command, and mixed economies is crucial for grasping how different nations organise their resources and make economic decisions that... Show more
Free Market Economy Fundamentals
You've probably heard politicians argue about "letting the market decide" - this is the free market economy in action. In this system, individuals own businesses and make their own choices without government interference, with prices determining what gets produced based on what people are willing to buy.
Adam Smith, an 18th-century economist, famously described the "invisible hand" that guides free markets. He believed that when everyone pursues their own self-interest through competition, it magically benefits society as a whole by keeping prices low and ensuring the right goods get produced.
Here's the catch though - no country today operates a completely free market. Governments always step in to issue currency, protect property rights, and prevent monopolies from taking over entire industries.
Quick Fact: Even the most capitalist countries like the USA still have significant government involvement in their economies!
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Free Market: Benefits and Problems
Friedrich Hayek, another influential economist, argued that government control destroys personal freedom and that even poor people in free market countries live better lives than those under state control. He believed individuals know their own needs better than distant government planners.
The advantages of free markets are pretty appealing: you get freedom of choice, high motivation (work hard, earn more), and efficient production that keeps costs down. Countries with freer markets typically experience faster economic growth too.
But there are serious disadvantages to consider. Free markets create massive inequality, fail to provide important services like education and healthcare adequately, and can lead to monopolies that exploit consumers. They also struggle with environmental problems since businesses focus on profit rather than protecting nature.
Reality Check: Even supporters of free markets admit they need some government regulation to function properly!
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Command Economy System
Imagine if the government owned every business and decided what job you'd do - welcome to a command economy. In this system, the state controls all factors of production (except people) and makes virtually every economic decision, often prioritising national goals over individual wants.
Karl Marx championed this approach, arguing that capitalism exploits workers by underpaying them whilst owners get rich. He envisioned a society where everyone would own everything collectively and income differences would disappear completely.
Command economies do offer some benefits: they guarantee everyone a minimum standard of living, avoid wasteful advertising and duplicate services, and can focus on long-term national planning without worrying about short-term profits.
However, the disadvantages are severe. These systems often produce too much of some goods and not enough of others, decision-making becomes painfully slow, and people lose motivation when everyone earns the same wage regardless of effort.
Historical Note: Most command economies like the Soviet Union eventually collapsed due to these fundamental problems!
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Mixed Economy: The Middle Ground
Most countries today, including the UK, operate mixed economies - a blend of free market mechanisms and government planning. Typically, governments control 40-60% of economic activity whilst leaving the rest to private businesses and market forces.
In mixed economies, governments play four key roles: they create rules to prevent monopoly abuse and protect consumers, provide essential services like emergency response and transport, redistribute wealth through taxes and benefits, and try to stabilise the economy during boom and bust cycles.
This system attempts to capture the benefits of both approaches whilst minimising their worst features. You get the innovation and efficiency of free markets combined with the stability and social protection that government involvement provides.
The exact balance varies dramatically between countries - Scandinavian nations have more government involvement than the United States, but both are considered mixed economies.
UK Example: The NHS represents government provision of healthcare, whilst most shops and restaurants operate as private businesses in the free market!
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Where can I download the Knowunity app?
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The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user