Question

What’s An Ideal Economy?( Hint: Draw the appropriate graph )

Answer 1

An ideal economy or economic system can be considered as a combination of capitalism and socialism . An ideal economic system is an outcome of such a combination where the benefits of both capitalistic and socialistic economy are found . It calls for resources , production and distribution partly owned by state and partly by private organizations . Here the distribution or equity is maintained by the state which also provides for social goods . The private sector looks after better utilization or resources or efficiency in production . So both the size of the economic pie and distribution of the pie should be well catered to in an ideal economy . The minimum wage is distributed among all workers , who should have basic subsistence wage . The economy should operate at Pareto Optimal situation where it is impossible to make someone better off without making another worse off . Monopolization should be curbed but firms should make nominal profits as an incentive to invest further .

The market should be cleared and there should not be any excess supply or deficit . Even the labor market should be cleared in an ideal economy .

The market clearing point and points on the PPF which are most efficient show an ideal economy .