Paper 3 · economic systems
State the term for an economic system in which decisions about what to produce and at what price are made through the interaction of buyers and sellers responding to price signals, rather than through central government planning.
Model answer
market economy
Also accepted: a market economy, free market economy
Explanation: In a market economy, decentralised price signals coordinate the decisions of individual households and firms, replacing the centralised production targets and administered prices used to allocate resources in a planned economy.
Derived from ZIMSEC Economics Paper 3, November 2004, Q1b
