Mixed Economy

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Modified on 2010/07/22 11:43 by swathen Categorized as Uncategorized

» Mixed Economy

Mixed Economy Definition¶

A mixed economy, defined as an economy where both the private market and the government control the factors of production, is the most common form of economy that exists in the world today. All of the major developed and developing nations are a mixed economy, as well as many of the smaller developed and developing nations. This is due to the fact that a completely capitalist economy, for example, has never existed. The term mixed economy is another name for dual economy.

Mixed Economy Explanation¶

A mixed economy, explained simply as an economy which has government restrictions on some but not all of the economic factors, is an important term in macroeconomics. This is because mixed economy countries are the most prevalent in the world.

In our mixed economy, United States government controls infrastructure, social services, and other factors. Outside of this, industries in the United States are more of a market economy, where goods and services are provided based on demand and price. The markets are restricted by the laws placed on them.

In the mixed economy system outside of the US, government decides what is best controlled by the free market. In situations believed to need outside assistance, government steps in to control industries with regulations or total state monopoly. Using the USA as another example, the energy industry was once a state monopoly. This restriction has since been lifted and competition has driven the price of energy down.

Mixed economy pros and cons differ from person to person. Some believe that government needs to control factors to avoid corruption and exorbitant prices on basic necessities. Others believe that the free market is the only method which moves fast enough to deal with the changes of consumers. The truth lies, surely, somewhere in between. Many economists argue that mixed economy advantages are best utilized by using the government as a temporary solution, allowing the free market to make long term decisions.