Mixed economy Flashcards
What is a mixed economy?
A mixed economy is an economic system that combines elements of both private enterprise and public control.
What is the public sector?
The public sector is the part of the economy that is controlled by the government, including services like healthcare, education, public transport, and national defense.
What is the private sector?
The private sector is the part of the economy that is run by private individuals or businesses, aiming to generate profits.
What is the difference between public and private sectors?
Public Sector: Owned and operated by the government.
Private Sector: Owned and operated by private individuals or businesses.
How does a mixed economy solve the problem of what to produce?
The government intervenes by providing public goods and services, while the private sector responds to consumer demand.
How does a mixed economy solve the problem of how to produce?
The private sector produces based on market demand, while the government may regulate to ensure standards and fair competition.
How does a mixed economy solve the problem of for whom to produce?
The private sector targets consumers who can afford goods, while the government ensures basic needs are available to all.
What is market failure?
Market failure occurs when the free market fails to allocate resources efficiently or fairly, leading to misallocation.
What are externalities in the context of market failure?
Externalities are costs or benefits that affect third parties, such as pollution or public health.
Why might governments need to intervene due to market failure?
Governments may regulate monopolies, provide public goods, correct externalities, and ensure equity and fairness.
What are public goods?
Public goods are non-excludable and non-rivalrous, meaning no one can be excluded from using them, and one person’s use does not reduce availability.
What is the free rider problem?
The free rider problem occurs when individuals benefit from public goods without paying for them, leading to underproduction.
What is the role of the public sector in the economy?
The public sector provides essential goods and services necessary for society’s well-being and ensures equity.
What is the role of the private sector in the economy?
The private sector focuses on producing goods and services in demand and profitable, driven by consumer preferences.
How do the public and private sectors differ in developed economies?
In developed economies, the private sector dominates production, but the public sector is crucial for public goods and managing market failures.
How do the public and private sectors differ in developing economies?
In developing economies, the public sector often plays a larger role in providing essential services and infrastructure.
What is privatisation?
Privatisation is the process of transferring ownership and control of a business or service from the public sector to the private sector.
What are the effects of privatisation on consumers?
Positive: Increased efficiency and lower prices.
Negative: Potential loss of access to essential services.
What are the effects of privatisation on workers?
Positive: Potential for better management and working conditions.
Negative: Risk of job cuts or wage reductions.
What are the effects of privatisation on businesses?
Positive: Increased competition and opportunities for expansion.
Negative: Pressure to maximize profits may affect service quality.
What are the effects of privatisation on government?
Positive: Reduction in public sector spending.
Negative: Loss of control over essential services could lead to greater inequality.
