Observation

This question was also popular among the candidates and their performance was average. Candidates were required to define an economic system in the (a) part of the question, explain capitalism, socialism and mixed economy in the (b) part of the question and state any three merits of capitalism in the (c) part of the question. Few of the candidates were unable to define economic system in the (a) part, the key distinguishing features of capitalism, socialism and mixed economy were not provided in the response of most candidates to the (b) part of the question. Some candidates were able to state the merits of capitalism in the (c) part of the question.

Candidates were expected to answer thus to score maximum marks in this question.

 

1. An economic system is an institutional framework in which available resources are used

to solve the basic economic problems of  a society.              

 

(b)(i)    Capitalism - This is an economic system which allows individuals to own factors of production and carry out their economic activities with minimum government control. The price mechanism regulates economic activities.               

     (ii)   Socialism –This is an economic system which is based on government ownership of nearly all productive resources. Private individuals have little control over the policies of government. Prices are fixed by the government.               

     (iii)  Mixed economy – This is an economic system in which resources are owned and controlled by both the government and private individuals.    

   

(c)        Merits of capitalism:
(i)    Freedom in production leads to a high degree of competition.
(ii)   Consumers are able to maximize their satisfaction (consumer sovereignty).
(iii)  The price mechanism leads to rapid economic growth and risk-taking.
(iv)  Competition leads to the use of the least-cost method of production.
(v)   Producers are able to maximize their profits and the less efficient ones are forced out of    business.
(vi)  The price mechanism helps in estimating correctly the needs of people instead of relying
on the use of officials.

     (vii)      Improved efficiency leads to maximization of profit