• The mixed economic system depends on both markets and governments in allocation of resources.
• Every economy in the real world makes use of markets and governments and is termed as a mixed economy in nature.
• In a mixed economy, the aim is to develop a system which tries to include the best features of both the controlled and market economy and excluding demerits of both.
• It appreciates the advantages of private enterprise and private property, with emphasis on self-interest and profit motive.
• Vast economic development of The USA, England, etc. is due to private enterprise. At the same time it is noticed that private property, profit motive and self-interest of the market economy may not promote the interest of the whole community as a whole and thus, the government should remove the defects of private enterprise. The government should run the most important and selected industries, thereby eliminating the free play of profit motive and self-interest.
• Private enterprise also plays a positive role in a mixed economy. However, the state imposes necessary measures to control and regulate the private sector to ensure that they function in accordance with the welfare objectives of the nation.

Features of a mixed economy: 

One of the most significant features of a mixed economy is the co-existence of the private and public sector.

In Fact, in a mixed economy there are three sectors of industries:

Let us consider each one of these points one by one:

1. Private Sector: production and distribution of this sector are to be managed and controlled by private individuals and groups. Industries in these sectors based on profit motive and self-interest. The system of private property exists, and personal initiative given full scope. However, private enterprise may sometimes regulate by the government directly or indirectly by a number of policy instruments.
2. Public Sector: industries in these sectors are not primarily profit oriented, but are set up by the state for the welfare of the community.
3. Combined Sector: in which both the private and government sector have equal access, and join hands to produce commodities and services, leading to the establishment of joint sectors.

Mixed economy has the following merits available to capitalist and socialist economy:

• Economic freedom and existence of private property, which ensures incentive to work.
• Price mechanism and competition forces the private sector to promote efficient decision-making and better resource allocation.
• Consumers to be benefited through consumer sovereignty and freedom of choice.
• Appropriate incentives for innovation and technical progress. And which encourages enterprise and risk-taking.
• Advantages of economic planning and rapid economic development on the basis of planned priorities.
• Comparatively, greater economic and social equality and freedom from exploitation due to greater state participation and direction of  economic activities.
• Disadvantages of cut-throat competition to be averted through government’s legislative measures such as environment and labor regulations.

Facts:

1. Not all wants can be satisfied.

2. In economics, we use the term scarcity to mean: Relative scarcity, i.e., scarcity in relation to the wants of the society.

3. Scarcity definition of economics given by Robinson

4. In every economic system, scarcity imposes limitations on: Households, business firms, governments, and the nation as a whole.

5. There is a need for economic study, because the resources are limited, and the wants are unlimited.

6. Managerial economics: applied economics that fills the gap between economic theory and business practice

7. The benefit of economic study is that it enables us to examine a problem in its right perspective.

8. Economist’s regard decision-making as important because The resources required to satisfy our unlimited wants and needs are finite, or scarce. It is crucial to understand how we can best allocate our scarce resources to satisfy society’s unlimited wants and needs. Resources have alternative uses.

9. Business Economics Involves practical application of economic theory in business decision-making, incorporating tools from multiple disciplines.

10.  Microeconomics is essential for study of a particular household and study of a particular firm, and macroeconomics is essential for study of economic conditions in a country.

11.  Macroeconomics: also known as aggregate economics.

12.  The difference between positive and normative economics is: positive economics describes the facts of the economy, while normative economics involves evaluating whether some of these are good or bad for the welfare of the people.

13.  The definition “science which deals with wealth of nations” is given by Adam Smith.

14.  The central problem in economics is that of allocating scarce resources in such a manner that society’s unlimited needs or wants are satisfied in the best possible manner.

15.  In economics, the central economic problem means output is restricted to the limited availability of resources.

16.  Administered prices refer to prices determined by an external authority, which is usually the government.

17.  The economic system in which all the means of production to be owned and controlled by private individuals for profit, known as capitalism.

18.  A capitalist economy uses prices as the principal means of allocating resources

19.  Capital intensive technique would get chosen in a capital surplus economy where the relative price of capital is lower

20.  Large production of capital goods would lead to higher production in the future.

21.  In a free-market economy, the allocation of resources to be determined by consumer preferences.

22.  Profit motive is a merit of socialism.

23.  Socialist economy also called as command economy

24.  In a mixed economy, economic decisions to be partly taken by the state and partly by the private entrepreneurs.

Conclusive Statement:

Mixed economy is not always a golden path between capitalism and socialism. It could suffer from substantial uncertainties. Mixed economy is sometimes characterized and excessively controlled by the state resulting in reduced incentives and constrained growth in the private sector, poor implementation of planning, higher rates of taxation, lack of efficiency, corruption, wastage of resources, undue delays in economic decisions and poor performance of the public sector. It is very difficult to maintain a proper balance between the public and private sector. In the absence of strong governmental initiatives, the private sector is likely to grow disproportionately. The system would then resemble capitalism, with all its disadvantages.

Thanks for reading this blog, hope you found this  informative. Please feel free to comment below.