Discuss whether or not consumers benefit more from a market economic system or a mixed economic system. 30 points
Answers
Explanation:
A mixed economy is a system that combines characteristics of market, command and traditional economies.1 It benefits from the advantages of all three while suffering from few of the disadvantages.
A mixed economy has three of the following characteristics of a market economy. First, it protects private property. Second, it allows the free market and the laws of supply and demand to determine prices. Third, it is driven by the motivation of the self-interest of individuals.
A mixed economy has some characteristics of a command economy in strategic areas. It allows the federal government to safeguard its people and its market. The government has a large role in the military, international trade, and national transportation.
The government’s role in other areas depends on the priorities of the citizens. In some, the government creates a central plan that guides the economy. Other mixed economies allow the government to own key industries. These include aerospace, energy production, and even banking. The government may also manage health care, welfare, and retirement programs.
Most mixed economies retain characteristics of a traditional economy, but those traditions don't guide how the economy functions. The traditions are so ingrained that the people aren’t even aware of them. For example, they still fund royal families. Others invest in hunting and fishing.
Key Takeaways
A mixed economy combines market, command, and traditional economies.
It has both the advantages and disadvantages of other types of economies.
Most countries have a mixed economy thanks to globalization.
Advantages of a Mixed Economy
A mixed economy has the advantages of a market economy.2 First, it distributes goods and services to where they are most needed. It allows prices to measure supply and demand.3
Second, it rewards the most efficient producers with the highest profit. That means customers get the best value for their dollar. Third, it encourages innovation to meet customer needs more creatively, cheaply or efficiently.
Fourth, it automatically allocates capital to the most innovative and efficient producers. They, in turn, can invest the capital in more businesses like them.
A mixed economy also minimizes the disadvantages of a market economy.4 A market economy could neglect areas like defense, technology, and aerospace. A larger governmental role allows fast mobilization to these priority areas.
The expanded government role also makes sure less competitive members receive care. That overcomes one of the disadvantages of a pure market economy which only rewards those who are most competitive or innovative. Those who can't compete remain at risk.
Disadvantages of a Mixed Economy
A mixed economy can also take on all the disadvantages of the other types of economies. It just depends on which characteristics the mixed economy emphasizes.
For example, if the market has too much freedom, it can leave the less competitive members of society without any government support.
Central planning of government industries also creates problems.5 The defense industry could become a government-subsidized monopoly or oligarchy system. That could increase the country's debt, slowing down economic growth in the long run.
Successful businesses can lobby the government for more subsidies and tax breaks. The government could protect the free market so much that it doesn’t regulate enough. For example, businesses that were too big to fail could be bailed out by the government if they started going bankrupt.
Examples of Mixed Economies
The United States Constitution guided America towards a mixed economy. The Fifth Amendment protects ownership of private property.6 It also limits government interference in business operations. That promotes the innovation that's a hallmark of a market economy.
At the same time, the Constitution encourages the government to promote the general welfare.7 That creates the ability to use aspects of a command economy if it's for the overall good of the people.
The First Amendment protects the rights of groups to practice their religious beliefs. That allows communities like the Amish in Pennsylvania to retain their traditional economy.8
Most of the world's major economies are now mixed economies.
Answer:
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Explanation:
Market economies have little government intervention, allowing private ownership to determine all business decisions concerning how a business is run. This type of economy leads to greater efficiency, productivity, and innovation.