• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

It can be argued that the UK has a free market economy. To what extent is this true or do you disagree? Also, explain how you perceive the economy of the UK to be organised in relation to a country like communist China.

Extracts from this document...


Homework Daniel Isenberg 10P 12th March 2003 It can be argued that the UK has a free market economy. To what extent is this true or do you disagree? Also, explain how you perceive the economy of the UK to be organised in relation to a country like communist China. [40] A free market economic system is employed by Governments, in which people and firms privately own all resources. Hence, all goods and services within the economy are produced by the private sector, with the aim of maximising profit. However, in order to boost profit, the firms must produce in whichever markets are expanding according to consumer demand, highlighting the consumer sovereignty that exists within a free market economy. Within this economic system, in order to purchase a good or service, one has to be in effective demand, i.e. both able and willing to purchase the commodity, meaning some goods will be unattainable for those on a low income. Therefore, if a price is too high, then demand will fall and producers will decrease supply and if the price is low, demand will increase and supply will follow. This is known as the price mechanism of supply and demand, which exists and shows how market forces within a free market solve the problems of what to produce, how to produce it and for whom, in effect determining the allocation of scarce resources. In this way, the free market can rapidly respond to changes in people's wants and produces wide variety of goods and services to meet these varied demands, which are manufactured using techniques, which develop as technology changes, due to the entrepreneurial managers of firms within the free market. ...read more.


However, the USA has a much larger proportion of its industries in the private sector than Britain, such as health and part of the education system, with 5% less of total spending coming from the public sector. Despite this, the USA has nationalised defence, law and order and parts of the transport system, mainly due to the free rider problem that would arise were they privatised. The reasons for the UK's economy lying to the left of that in the USA lie deeper than the political founding of the legislature, but in the country's feudal heritage, in which the monarch relied on taxes from each layer of the hierarchal tree, therefore heavily regulating many goods, in order to maximise State revenue. Also, the sheer age of many of the UK's industries led to their ownership by the Government, who often had to take control in times of war, unlike America, independent only in 1776 and so the establishment of the new Government in an already productive country meant that rivalry in consumption allowed the free market to expand due to vast competition. Neither country has remained static in its economic structure, mainly due to historic circumstances like war, but also due to changes in Government. For example, the Great Depression of the 1930s and the election of the Democrats under Roosevelt in 1933 led to a reforming of the economic system that led to a shift towards the left, with the Government now regulating banks and the stock market, in order to prevent another crash occurring. ...read more.


In 2002 China joined the World Trade Organisation (WTO), which opened its markets to foreign trade and effectively lost the socialist-style economic system, on which the country had previously been based. Ever since 1978 Chinese GDP has risen rapidly, due to international trade and so it is unfair to compare China with Britain as a planned economy, because of its swift shift towards a free market. Despite this, there are few planned economies left in the World, especially ones that are powerful, and China can thank its planned economy for the improvement of social conditions and living standards, brought about by the fairly even distribution of wealth, although many luxury goods are not supplied ot the consumer. To conclude, the UK employs an economic system different to any other country in the World, due to the country's unique heritage, based on feudalism and a constitutional monarchy. Its is clear to say that the UK is not a pure free market economy, as this is only theoretical, but that the country mixes elements of the free market with those of a planned economy to form a mixed system, in which most prices are determined through the interaction of demand and supply, with private firms owning most resources, although the Government often steps in to regulate demerit goods, set taxes and provide certain goods that would not be provided in a pure free market. Therefore, the UK has a free market to as maximum an extent as possible, without the omission of certain merit goods, which the Government intervene to supply. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Main characteristics of free market economy

    In a Market economy the drive for optimum profit leads to the production of new products. Research and Development (R&D) is a crucial factor in the free market in which firms and businesses must continuously compete with others to be able to survive.

  2. Outline the ways in which the price mechanism allocates resources in a free market ...

    In the UK, this would be disastrous, since the EU allows complete freedom of mobility of labour from country to country. British workers would thus be incapable of performing as well as their european counterparts. With the increasing services industry in the developed countries, education is more important since these jobs often require educational qualifications.

  1. The mixed market economy and the allocation of resources.

    This is because the market economy (grey dot) is not close enough to the (red) PPF line: diagram 13:PPF Capital goods Consumer goods Thus the mixed market adapts features and ideas from the command economy, such as some public ownerships and services, planned production, redistribution by the government directives to improve economic efficiency of resource allocation.

  2. Free essay

    What are the main characteristics of a free market economy and centrally planned economy?

    production and resources, and thus, no development of resources and technology to help minimize the use of resources. This also implies that people will have no rights to become entrepreneurs or capitalists and set-up their own firm because the state will issue all that.

  1. To what extent is the UK airline industry a contestable market?

    First of all, companies need to get license from the authorities and there are regulations that are needed to be obeyed especially on safety issues during operation. The availability of desired take-off and landing slots at airports is limited and at different cost depending on how busy the airport is.

  2. The mixed market economy.

    redistribution would enable one individual to be made better off without making someone else worse off"3. This means that an efficient allocation of resources should consider both the consumer (demand) and the producer (supply) and it should content the needs of both. The best way is again the price mechanism.

  1. What is a capitalist (market / free) economy? The capitalist system operates on the ...

    Therefore, it is necessary that the government plays a role in the economy, but in a restrained way. This could be called "Laissez Faire", which means that the businesses and the economy should be 'left alone' by the government. Examples of Countries with the Market (Free)

  2. Outline the main features of a market economy and compare it to a Command ...

    Therefore they can become poor as they can't work or can't find a job that will give them an income that is enough to survive and therefore have little or no influence on what is produced, as the consumers with the highest purchasing power will have the majority of the

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work