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In: Finance

Discuss the differences, similarities, advantages, and disadvantages of market and mixed economies

Discuss the differences, similarities, advantages, and disadvantages of market and mixed economies

Solutions

Expert Solution

Market economy is the economy where price and production is freely controlled by buyers and sellers freely conducting business and here Investment and production decisions are based on supply and demand.

Advantages of market economy :-

i) Increased efficiency of market due to Increased competition in the market.

ii)Better productivity and innovation due to better management and allocation of resources owned by individuals.

Disadvantages of market economy :-

i) Disparity in wealth because wealthier getting more wealth and vice versa.

ii) Poor working conditions due lack of government regulations.

Mixed economy is the economy where supply and demand is controlled both by government and buyers and sellers.There is partial control of government.

Advantages of mixed economy :-

i) It promotes quick economic development.

ii) It encourages lesser income inequality.

Similarities between market and mixed economy :-

Both economy perform with general economic players like producers, consumers,goods or services etc and aim of both economy is to produce and supply goods and services using minimum amount of resources.

Differences between market and mixed economy :-

In market economy there is intervention of government in it's regulation whereas in case of mixed economy it is partially controlled by government.

In market economy price and production is determined by demand and supply factors only whereas in case of mixed economy price and production is determined by considering both supply and demand and also various regulations of government.


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