Question

In: Economics

Discuss the characteristics of market economy and mixed economy.

Discuss the characteristics of market economy and mixed economy.

Solutions

Expert Solution

Market economy and mixed economy.

Generally there are three forms of the market

  • Market economy
  • Social Economy
  • Mixed economy

market economy is the economy where the prices and the quantities are decided by the power of market forces that is the supply and demand.

There is no intervention of the government, so it is called the laissez fair economy.

The main purpose of market economy is to increase the profit of private sector.

It is not concerned about the welfare of economy.

social economy is the economy where the prices and output are decided by the government.

The purpose of such economy is to increase the welfare of nation. They charges the price based on the purchasing power of people, and decide the quantity which ensures the maximum welfare of the people

Then the mixed economy is the economy where the prices and output are decided by the mutual powers of Government and market forces. First prices are decided by the market forces, and then government adjust them according to the maximum welfare.


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