mixed economic system

Question 1

what is the mixed economic system

Answer 1

The mixed economic system is a combination of both the planned economy
and the market economy.

Question 2

what is the maximum price

Answer 2

A maximum price occurs
when the government sets
a price below the market
equilibrium price in order
to encourage consumption

Question 3

what is the minimum price

Answer 3

A minimum price occurs
when the government sets
a price above the market
equilibrium price in order
to encourage output of a
certain good or service

Question 4

The advantages of imposing an indirect tax on a good or service include the
following:

Answer 4

• it increases price, so should reduce the quantity demanded
• It generates tax revenue for the government which can be used to fund
  important goods and services

Question 5

The disadvantages of imposing an indirect tax on a good or service are as follows:

Answer 5

• The demand for cigarettes, alcohol and petrol (gas for a car) tends to be price
  inelastic, which means that the increase in price may have little impact on the
  consumption level of many people.
• The indirect tax will be regressive , so will have a greater impact on low income earners than high income earners

Question 5

Other examples of laws and regulations imposed to correct market failures are:

Answer 5

» laws regulating where people can drive, cycle and gamble

» regulations imposed to make sure children are vaccinated against certain
diseases

» laws making it illegal for people to eat or to talk on a mobile phone while
driving

Question 6

The advantages of imposing rules and regulations to correct market failures are as
follows:

Answer 6

• Consumption of the good or service may be reduced.
• Awareness of the negative impacts of demerit goods

Question 7

The disadvantages of imposing rules and regulations to correct market failures are
as follows:

Answer 7

• Restrictions cause underground (illegal) markets to provide the good or service,
  often at a very high price
• People break the rules — for example, under-age smokers and alcohol drinkers
  can bypass the law by obtaining false ID cards.

Question 8

what is privatisation

Answer 8

Privatisation is the transfer
of the ownership of assets
from the public sector to
the private sector

Question 9

Disadvantages of privatisation include the following:

Answer 9

» The process creates a private sector monopolist, which is not always a positive
outcome for customers, who will face higher prices.

» To protect the public interest, privatisation may still require government
regulation and intervention.

Question 9

Advantages of privatisation include the following:

Answer 9

• The ability to earn one-off privatisation proceeds from the sale of state-owned
  assets.

» It also reduces costs to taxpayers, who no longer have to pay to fi nance the
operations of the business.

» Private sector businesses have the incentive to improve effi ciency, as they need
to remain competitive. This can also promote an enterprising culture of risk-
taking and innovation.

Question 10

define nationalisation

Answer 10

Nationalisation is the
purchase of private sector
assets by the government.

Question 10

The advantages of direct government provision of goods and services are as
follows:

Answer 10

» The goods and services are accessible to all people in society, regardless of
their income or social status.

» Consumption of the good or service has private benefits for the individual and
external benefits for third parties in society.

Question 11

The disadvantages of government provision of goods and services are as follows:

Answer 11

» There is an opportunity cost as the money could have been spent on
something else, such as paying off government debt or possibly reducing rates
of taxation.

» Goods and services which are free of charge may be over-consumed, so
long queues or shortages may arise