1.1.5 mixed economy

Question 1

Mixed economy

Answer 1

Economy where both private and public sectors provide goods and services

Question 2

Private sector

Answer 2

Part of the economy owned/controlled by individuals or a group of individuals

Question 3

Public sector

Answer 3

Part of economy owned/controlled by government organisations

Question 4

Ownership and control in the private sector (enterprises)

Answer 4

• Sole traders (one-person businesses)
• Partnerships (business owned by two or more people)
• Companies (businesses which shareholders own)

Question 5

Aims of the private sector

Answer 5

• Survival
• Profit maximization
• Growth
• Social responsibility

Question 6

Who owns and controls in the public sector (enterprises)

Answer 6

• Central government departments (e.g department of health)
• Public corporations/state-owned enterprises(SOEs)
• Local authority services (e.g public libraries, swimming pools)
• Other public sector organisations (e.g post-office)

Question 7

Aims of the public sector

Answer 7

• Improving quality of services
• Minimizing costs
• Allows for social costs and benefits
• Profit

Question 8

What to produce? (private sector)

Answer 8

• Foods
• Clothes
• Leisure
• Entertainment
• Household services
  (Best provided by the private sector as they are best chosen by consumers)

Question 9

What to produce? (public sector)

Answer 9

• Education
• Street lighting
• Roads
• Protection
  (Goods the private sector may fail to provide in sufficient quantities)

Question 10

How to produce? (private sector)

Answer 10

Maximise quality and minimize costs

Question 11

How to produce? (public sector)

Answer 11

Some are provided by private sector but paid by governments

Question 12

For whom to produce? (private sector)

Answer 12

Anyone who can afford it (allocated by the market system)

Question 13

For whom to produce? (public sector)

Answer 13

Provide free for everyone and paid for from taxes

Question 14

Market failure

Answer 14

When markets lead to efficiency (inefficient allocation of resources)

Question 15

Why governments may intervene because of market failure

Answer 15

• Externalities: not all costs of production are taken into account
• Lack of comp.: markets fail when there is no competition and are dominated by firms
• Missing markets
• Lack of info: how to produce(businesses), what goes into products(consumers)
• Factor immobility: some workers may only how to do certain things

Question 16

Public goods

Answer 16

Goods provided by the public sector - not charged for by consumers for usage and are non-exhaustible/non-extinguishable/non-rivalrous

Question 17

Non-excludability

Answer 17

When a public good is provided in the market, no individual consumer is prevented/excluded from using it

Question 18

Non-rivalry

Answer 18

The consumption of a public good by one individual cannot reduce the amount available to others

Question 19

Free rider

Answer 19

Individual who enjoys benefits of a good by allows others to pay for it (not contributing)

Question 20

Market:free enterprise economy

Answer 20

Relies the least on the public sector for the provision of goods and services; the vast majority is provided by private businesses

Question 21

Command/planned economy

Answer 21

Relies entirely on the public sector to choose, produce and distribute goods; all resources belong to the govt. and are distributed from state owned shops to consumers at prices set by the state