Syllabus: Pearson - A Level Economics
Module: 1.1 Nature of Economics
Lesson: 1.1.6 Free Market Economies Mixed Economy and Command Economy

Introduction

This article supports delivery of Pearson Edexcel A Level Economics A, Theme 1: Introduction to markets and market failure. Within section 1.1.6, students are introduced to three types of economic systems: free market, mixed, and command. This isn’t just foundational theory—it’s the lens through which learners can understand every economic policy debate, from tax reform to healthcare funding.

This lesson is pivotal for developing a clear grasp of how different economies allocate resources, which directly links to student understanding of the price mechanism, market failure, and government intervention covered later in the theme. Teaching this well means students gain a deeper sense of how economic ideas shape lives and policy.

Key Concepts

According to the Pearson A Level Economics specification, students should be able to:

• Distinguish between free market, mixed, and command economies

• Reference key economic thinkers:

  • Adam Smith (invisible hand, laissez-faire)

  • Friedrich Hayek (knowledge in markets, decentralised decisions)

  • Karl Marx (critique of capitalism, state ownership)

• Evaluate the advantages and disadvantages of free market and command economies

• Understand the role of the state in a mixed economy

These aren’t just abstract comparisons—they’re fundamental to analysing real-world issues like inflation control, wealth redistribution, or privatisation.

Real-World Relevance

Economic systems aren’t just textbook theory—they shape how countries handle everything from healthcare to housing.

• Free market example: The United States has traditionally leaned towards minimal state intervention. However, debates around healthcare access highlight limitations of relying purely on market mechanisms.

• Command economy example: North Korea remains an extreme case, where the state allocates virtually all resources. But its inefficiency and lack of consumer choice reveal structural flaws.

• Mixed economy example: The UK is a textbook mixed economy—education and the NHS are state-provided, but most goods and services operate within markets. The 2008 financial crisis and 2020 furlough scheme both saw the UK government step in to stabilise the economy, showing the adaptive role of the state.

Bringing in headlines, like public debates over rail nationalisation or NHS funding, helps students relate abstract models to current affairs.

How It’s Assessed

In Pearson A Level assessments, this topic typically appears in:

• Paper 1 (Markets and business behaviour), often as:

  • Short explain-style questions (e.g. “Explain one advantage of a command economy”)

  • 10- or 12-mark analysis questions (e.g. “Analyse why some countries prefer a mixed economy model”)

  • 25-mark essays evaluating models with reference to real data and economists

Command words you’ll encounter include:

• Distinguish, Explain, Analyse, Evaluate

Students should practise applying theory to unfamiliar case studies and be prepared to reference economic thinkers where relevant.

Enterprise Skills Integration

This topic offers a natural link to several enterprise skills:

• Decision-making: Understanding how different systems allocate resources helps students evaluate trade-offs in real business and policy decisions.

• Problem-solving: Analysing economic inefficiencies in different systems encourages critical thinking.

• Communication: Debating the merits of each system hones students’ ability to structure arguments and use evidence effectively.

A practical extension might include a classroom simulation: assign students roles as economic advisers in different systems, challenging them to respond to a scenario like a food shortage.

Careers Links

This topic sits neatly against Gatsby Benchmarks 4, 5 and 6, offering clear links to:

• Economics and public policy roles (e.g. Treasury, local government)

• International development (e.g. NGOs comparing aid effectiveness in different systems)

• Business strategy and consultancy, where understanding economic systems helps businesses navigate regulation and market entry globally

Introduce students to pathways in economics, law, government, and international relations. Highlight employers like the Bank of England, HM Treasury, and global think tanks.

Teaching Notes

Common pitfalls:

• Students often oversimplify: e.g. “free markets are always better because there’s more choice”. Challenge them to consider equity, public goods, and externalities.

• Many conflate socialism with command economies. Clarify distinctions, especially when using modern mixed economies as examples.

Teaching tips:

• Use current data—OECD, IMF, or BBC economics stories—to ground comparisons.

• Encourage students to draw links between 1.1.6 and later topics like market failure or government intervention.

Extension idea:
Ask students to research how different economies responded to the COVID-19 pandemic, comparing the market-led versus state-led approaches to vaccine distribution or lockdown support.