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Mixed Economic system-converted

Mixed Economic System
-A mixed economic system is an economic system
that features characteristics of both capitalism and
- A mixed economic system allows a level of private
economic freedom in the use of capital, but also allows
for governments to interfere in economic activities in
order to achieve social aim.
 Mixed economy=Capitalism + Socialism
Features of mixed
• Some private businesses, driven by profit. Some
controlled by government
• Private: mobiles, cars, computers
• Essential services: police, fire service, defence, social
services. Goods and services which can benefit both
consumer and society(merit goods)
• Taxes to the government
• Government places limits on the nature of business
activity: restricting monopoly, control pollution from
• the ownership of goods by both private and
government/state-owned entities.
Some characteristics of a mixed economy
 to possess means of production (farms, factories, stores, etc.)
 to participate in managerial decisions (cooperative and participatory
 to travel (needed to transport all the items in commerce, to make deals in
person, for workers and owners to go to where needed)
 to buy (items for personal use, for resale; buy whole enterprises to make the
organization that creates wealth a form of wealth itself)
 to sell (same as buy)
 to hire (to create organizations that create wealth)
 to fire (to maintain organizations that create wealth)
Some characteristics of a mixed economy
 to organize (private enterprise for profit, labor unions, workers' and
professional associations, non-profit groups, religions, etc.)
to (communicate (free speech, newspapers, books, advertisements, make
deals, create business partners, create markets)
to protest peacefully (marches, petitions, sue the government, make laws
friendly to profit making and workers alike, remove pointless inefficiencies to
maximize wealth creation)
 private sector business activity encouraged.
 state control resources in supply of certain goods and services.
 taxes used to collect revenue to pay for state goods and services.
Circle flow model of mixed economy
Transcript of circle flow model
Government buys land, labor, and capital from households in the factor market .
Government in factor market
- governments purchase goods and services in the product market.
- governments also provide certain goods and services through the factor resources
that they combine.
Government in the Product Market
-buildings and office supplies,telephones,computers and fax machines.
Example of mixed economical country
This system usually begins by authorizing private enterprises to run the
majority of businesses before the government intervenes with specific
areas of economics, such as inflation protection and taxes. Great
examples of countries running on mixed economy are
Hong Kong
Pros and cons of mixed economy
Equal Distribution of Control
- Unlike command economies that put the government primarily in charge, a mixed
economy gives the government less regulation and control. This provides the private
market with freedom to thrive, operate, expand and grow.
More Efficiency for Private Firms
-As stated above, most of the business is left to the private firms, so these
organizations are more likely to be efficient compared to groups that are controlled
by the government, as they have profit incentive for being innovative and for cutting
Freedom for Private Enterprise to Thrive On TheirOwn
-In most cases, private companies can perform public service jobs more efficiently
than the government itself. In addition, businesses can allow people to enjoy
financial rewards for hard work.
Pros and cons of mixed economy
More Job Investments Coming In
- For private companies to improve profits, they often will not try to increase
income, but decrease expenditure instead by cutting down on employment.
days, this comes not only in the form of job cuts, but outsourcing as well.
Greater Chance for the Government to Implement Good Policies
- This type of economic system is known for allowing government regulations in
areas where market failure is experienced. This means that a region will have more
space to develop and grow to attain economic success.
Safe Haven from Poverty
- A mixed economy can help create improved equality and can offer safety
net that will prevent the people in a certain country from suffering absolute
poverty. It even allows people to enjoy financial rewards of hard work and
Difference between Mixed economy and
Capitalism embraces private ownership of institutions, and
discourages government intervention in the economy. The main
goal of capitalism is profit.
Not all countries embrace capitalism wholly. Some
countries choose to maintain a balance between private
and government ownership. Such countries utilize the idea
of the mixed economy.
The mixed economy is a balance between socialism and capitalism. As
a result, some institutions are owned and maintained by the government,
while others are owned by the private sector.
The mixed economy allows economic participation from both the private
sector and the government. However, mixed economy is still biased
towards capitalism.
Differences between Mixed economy and
The main difference between a mixed economy and a socialist
economy is that the latter only uses socialistic principles while a mixed
economy may use capitalistic and socialistic principles.
A mixed economy is defined as an economic system consisting of a
mixture of either markets and economic planning, public ownership and
private ownership , or free markets and economic interventionism.
Socialism is an economic system where the ways of making money
(factories, offices, etc.) are owned by a society as a whole, meaning the
value made belongs to everyone in that society, instead of a small group of
private owners.
Role of government in mixed economy
Governments regulate mixed economies by formulating rules and regulations to
protect the producers and consumers in the market.
 Regulation also serves as a means of ensuring that mixed economies utilize
economic resources efficiently and allocate scarce resources in a scientifically
responsible manner.
 Governments plan the necessary production targets in private industries while
protecting the defense, public utility services and heavy industries. Economic
inequality is also minimized in a mixed economy because income gets
redistributed through taxation and government subsidies.
Role of government in mixed economy
 Although the government does have jurisdiction over the activities that take place
in a mixed economy, the amount of control the government has is comparably
less than in a socialist economy, where most of, if not all of, the market is
controlled by the government.
 Such economies rely heavily on tax revenues and are less likely to benefit from
price signals or discipline imposed by market forces. It is for this reason that
economists claim that mixed economies are more efficient than economies with
substantial government ownership.
• State provides the essential services.
• Private sector encouraged for profits.
• Competition keeps prices low.
• Consumer choice.
• Inefficient business behavior controlled.
Greater Chance for the Government to Implement Good
• More Job Investments Coming in Safe Haven from Poverty.
• Heavy taxes reduce incentives to work hard or make profits.
• Less efficient than private sector.
• Excessive control over business activity can add costs and
discourage enterprise.
Challenge of Finding a Balance.
• Government Going Too Far.
Limited Corporate Size.
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