Practise weighing free market and command economy outcomes, including incentives, public goods, regulation and government spending changes.
In 2007 Ireland's Government spending as a percentage of GDP was 35.9% and by 2019 it had fallen to 25.1%.
Evaluate the possible benefits of an economy moving closer to being a 'free market economy'.
QS9: Interpret, apply and analyse information in written, graphical, tabular and numerical forms.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance.
The indicative content below exemplifies some of the points that candidates may make, but this does not imply that any of these must be included. Other relevant points must also be credited.
Knowledge, application and analysis (12 marks) - indicative content
- Definition of free market economy- resources are allocated by the price mechanism with little/no government intervention
- Mixed economy- where resources are allocated by the price mechanism and government
- Ireland is a mixed economy with government spending 35.9\% of GDP in 2007 and 25.1\% in 2019
- Reduced by 10.8 percentage points over 12 years
- Movement towards more free market- more resources are allocated by price mechanism and less by the government
Benefits of a free market economy
- Resources are allocated efficiently to where expected profit is highest
- Competition between firms creates better products for consumers
- The profit motive encourages firms to spend money to create better products
- Resource allocation is determined by the pattern of consumer demand rather than by the government
- Competition between firms encourages them to lower prices to keep customers
- Reduces risk of government failure as less resources wasted in expensive administration by governments
- Incentive to work harder as workers can earn more
Candidates should be rewarded for relevant use of a diagram.
Level
Mark Descriptor
Level 0
Level 1
1-3
Level 2
4-6
Level 3
7-9
Demonstrates accurate knowledge and understanding of economic terms, principles, concepts, theories and models.
Ability to apply knowledge and understanding to some elements of the question. Some evidence and contextual references are evident in the answer.
Analysis is clear and coherent. Chains of reasoning in terms of cause and/or consequence are evident but they may not be developed fully or some stages are omitted.
Level 4
10-12
Demonstrates accurate and precise knowledge and understanding of economic terms, principles, concepts, theories and models.
Ability to link knowledge and understanding in context, using appropriate examples which are fully integrated to address the broad elements of the question. Analysis is clear, coherent, relevant and focused. The answer demonstrates logical and multi-stage chains of reasoning in terms of cause and/or consequence.
Evaluation (8 marks) - indicative content
Disadvantages of free market economy
- Can lead to significant inequality
- Some firms can become powerful raising prices
- Non- provision of public goods
- Underprovision of goods with external benefits such as health and education
- Overprovision of goods that cause external costs
- Instability- e.g. after financial crises/lockdown
Other evaluative comments
- Magnitude- sizeable reduction in government spending as a proportion of GDP-
10.8 percentage point substantially less government involvement
- Ireland is still a mixed economy despite the reduction in the share of government
spending
- The amount of government spending in Ireland may not have fallen despite the percentage falling if GDP was increasing
- 25.1% may mean that the public goods and key public services are still provided
- Need data on other factors to determine whether Ireland has benefitted or not by its
movement towards free market economy
- Just over € 1 in every € 4 is still government spending so still significant government
involvement in the economy
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-3
Identification of generic evaluative comments.
No supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2
4-6
Evidence of evaluation of alternative approaches.
Some supporting evidence/reference to context.
Evaluation is supported by a partially-developed chain of reasoning.
Level 3
7-8
Evaluation recognises different viewpoints and/or is critical of the evidence, leading to an informed judgement.
Appropriate reference to evidence/context.
Evaluation is supported by a logical chain of reasoning.
Question
Evaluate ways that would encourage and enable consumers to make rational decisions.
Indicative content