1.4.3 Mixed Economy

Question 1

Meaning of mixed economy

Answer 1

Economies where the balance between allocation of resources by the price mechanism in private sector and allocation of resources by government planning process in the public sector is more equal

Question 2

Characteristics of mixed economy

Answer 2

1. Ownership
   - FOP are partly owned by private individuals but the state also owns a significant proportion
2. Motivation
   - In private sector, consumers and producers are assumed to be motivated by self interest
   - In public sector, is motivated by considerations of the good of the community
3. Government
   - Government only intervenes in particular industries where
   A) its is not profitable for private sector to provide
   B) military reasons
   C) Humanitarian reasons

Question 3

Advantages of mixed economy

Answer 3

1. Promotes quick economic development
2. Encourages lesser.income and wealth inequality
3. Provides the freedom to own private property
4. Economic activities are more stable and organised

Question 4

Disadvantages of mixed economy

Answer 4

1. Fears of nationalisation
   - Nationalisation is the process of transforming privately owned assets into public assets.

2.can lead to higher tax
- With more state intervention, it would mean that the government would invest more and would get their fund s largely from taxation revenues

3. Corruption and black marketing
   - Political parties may and self interested people may take unfair disadvantage from public sector
   - resulting in bribe, tax evasion and other illegal activities