An economy is a system that provides people with goods and services and directly or indirectly satisfies their wants. In this article, you are going to learn about Mixed Economy.
On the basis of ownership over the means of production, economies are classified into the following categories:
- Capitalist economy
- Socialist economy
- Mixed economy
What is Mixed Economy?
It refers to a type of economy wherein some important part of production is undertaken by the government, while some is left to private owners. Thus, it is a blend of both capitalist and socialist
Main features of a mixed economy
- Certain economic activities are fully owned and controlled by the government. All economic activities are not allowed by the government.
- Private and public sectors co-exist in the economy.
- All the basic industries such as railways, electricity, posts and telegraphs, defence production, atomic energy are in the public sector. Industries dealing with consumer goods are in the private sector.
- Mixed economy reduces inequality of income.
- Presence of the private sector, right to own property and law of inheritance encourage individuals to earn more, save more, invest more, acquire more assets and become richer.
The demand for goods and services arises from human wants. No individual in the whole world can fulfill all his/her wants. Wants are unlimited and means are limited. Thus, this scarcity of means in relation to wants brings forth the economic problem of how many resources should be used in satisfying different wants. In this way, one has to choose a set of wants from among unlimited wants which are to be satisfied with limited resources. Scarcity means a situation where only a limited amount of goods can be produced because of the existence of a limited amount of resources.
Central problems of an economy are the problems faced by and common to all kinds of economic systems (capitalism, socialism, and mixed economy). These include problems with decision-making about what to produce, how to produce, and whom to produce. This is because it is not possible for any economy to produce an unlimited variety of goods with limited resources.