Mixed economy Flashcards
What is the mixed economy
A mixed economic system is one that combines aspects of both capitalism and socialism.
name the two sectors of mixed economy
Public and private
what does market failure mean
an inefficient distribution of goods and services in the free market.
why does the government need to intervine with market failure
- To provide public goods e.g. army, hospitals, police
- To provide under-provisioned merit goods e.g. education, health, roads.
- To decrease demand for demerit goods e.g. Drugs (law) and tobacco (law and taxes)
- To prevent monopolies (a company that has no rivals and can therefore exploit consumers)
- To control externalities e.g. pollution.
what are public goods
commodity or service that every member of a society can use without reducing its availability to all others
what are private goods
Private goods are those whose ownership is restricted to the group or individual that purchased the good for their own consumption.
name some public goods
- Street lighting
- Lighthouse Protection
- Police services
- Air defence systems
- Roads / motorways
- Terrestrial television
- Flood defence systems
- Public parks & beaches
what are the classifactions of public goods
Non-excludability – once it is created everyone benefits
Non-rival: consumption doesn’t diminish the benefit e.g. everyone can consumer the light unlike a sandwich
what is privatisation
Privatization describes the process by which a piece of property or business goes from being owned by the government to being privately owned
what is resource allocation
Resources are scarce and decision must be made as to were these resources are allocated.
