Cambridge International as and a level Economics Ebook

SELF-ASSESSMENT TASK 
1.5
1
Assume that an economy undergoes the process 
of reform shown in 
Figure 1.5
.
a
Give an example of an organisation that 
will disappear with a move to competitive 
markets.
b
Give an additional source of revenue for the 
government.
c
Give a source of expenditure for the 
government that is no longer appropriate.
2
Briefl y describe how the roles of government 
and the private sector will change aft er the 
implementation of economic reforms.
3
Discuss the extent to which it is appropriate for 
your country to adopt the market-based system 
shown in the lower part of the diagram.
26
Cambridge International AS Level Economics

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provision of food and drink, personal services such as 
hairdressing and dentistry, etc. At the same time, many 
more would-be entrepreneurs have failed to achieve 
success – they have suff ered by not being able to overcome 
the risks that are involved in competitive markets.
Scarcity and choice: 
Just how scarce resources are 
allocated depends to some extent on the type of economy. 
Irrespective of this, choices have to be made in all types of 
economy. Changes to the economic systems and structure 
of an economy by governments are designed to improve 
economic well-being.
KEY CONCEPT LINK
Production possibility curves
How many goods and services an economy is capable 
of producing is determined by the quantity and 
quality of resources available to it, together with the 
state of technical knowledge. Th
ese factors determine an 
economy’s so-called production possibilities.
Take the case of a simple economy which, given its 
available resources, can produce either military goods or 
consumer goods or a combination of each. Th
e various 
possibilities are shown in 
Table 1.2
.
It is sometimes useful to illustrate the choices open to an 
economy by considering the