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Role of the Private Sector in an Economy


Discuss whether or not an increase in the role of the private sector will benefit an economy.


Public Finance and Government Intervention

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I. 🍃Introduction
- Brief explanation of the market economic system

II. Benefits of the market economic system (up to ➡️5 marks)
- Profit incentive leads to specialisation and efficient use of resources
- Competition leads to lower prices and higher quality
- Efficient allocation of resources and high consumer sovereignty

III. Drawbacks of the market economic system (up to ➡️5 marks)
- Rising inequality and poverty
- Private companies exploiting market power
- Under-provision of merit goods and over-provision of demerit goods
- Market failure due to externalities

IV. Example of market failure due to externalities
- Explanation of the example

V. 👉Conclusion
- Summary of the benefits and drawbacks of the market economic system
- Importance of addressing market failures to ensure a fair and efficient economy.

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