Question

Identify the type of economic system that is used in your chosen economy and
then explain the main characteristics of the economic system.

Answer 1

The economy is India

The economic system used is a Mixed economic system - It combines the characteristics of the market and commands economic systems. A mixed economy is a combination of capitalism and socialism. Under this, the advantages of both capitalism and socialism are incorporated and at the same time, their evils are avoided. The public and private sectors work in a co-operative manner to attain the social objectives under a common economic plan.

The main characteristics of this economic system with explanation are:

1) Co-existence of the private and public sectors - Profit will be the primary motive of private sector industries. In public sector, industries are owned and managed by the Government. Public industries will also have profit motive but that too for the promotion of social welfare.

2) Joint sector - The Government and private individuals establish an organization jointly by contributing the necessary capital.

3) Control and regulation over private sector industries - Government exercises strict control and regulation over private sector industries.

4) Planned economy - The planning commission decides the objectives, targets, and allocation of resources, etc.

5) Private firms and individuals have the right to own and use property

6) The government takes steps to provide social security

7) The motive of the business concerns is profit but coupled with the objective of social welfare.

8) The government takes a step to reduce income & wealth inequality

9) Economic freedom - The freedom of enterprise and profit motive are important features. Further, there is a competition between public and private sectors. These factors increase efficiency, initiative, innovation, and productivity. Goods are produced as per the wishes of the consumers, which results in consumer’s sovereignty in a mixed economy.