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Basic Economics

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Advantages and disadvantages of MIXED ECONOMY

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Advantages and disadvantages of MIXED ECONOMY

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What is a Mixed Economy?

Yesterday in class, Sam was really struggling with his homework. He decided to ask his classmate Sara about America's economic system as he was really unsure about what type of system we have.

Sara explained, 'Sam, the United States is a country with a mixed economy.'

Sara continued on:

'Two other economic system examples are market economies and planned economies. In a market economy, the consumer plays a larger role than the national and state government. The economy is run by the consumers' purchasing choices. In a planned economy (also called a command economy), the government controls all of the decisions for owning, making, issuing, and exchanging goods.'

He replied, 'Okay, that makes sense, but what about the mixed economy? Sara, can you tell me the features of that type, and maybe give some examples?'

'A mixed economy consists of both private companies and government/state-owned entities. Both have control of owning, making, selling, and exchanging goods in the country. We learned what planned and market economies are; let's just think of a mixed economy as containing features of both planned and market economies.'

Characteristics

'One main characteristic of a mixed economy is the ownership of goods by both private and government/state-owned entities. Monopolies have the potential to occur in this type of economy, but the government closely monitors this. For the economy to be mixed, the government can control some parts but not all. For example, the government may control health care and/or welfare in some mixed economy countries.'

Examples

'Let's look at some examples of mixed economies in more detail.'

Example 1: United States

'The U.S. consists of both private and government/state-owned entities. Sometimes, the government gets involved to help the economy. Two examples of government assistance in the U.S. are welfare and unemployment benefits. These provide financial assistance for people who are in need. There are many types of welfare programs including:

Housing aid

Aid for children

Healthcare

Food stamps (which are tickets and/or funds designated to buy food for people with low income)

The government also gets involved with minimum wage policies. Private and government-owned entities must follow these rules.'

Example 2: France

'France is also considered a mixed economy. The economic system is a mix of both command and market economies. The government has some involvement when it comes to employee benefits and welfare.

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characteristics & examples - video & lesson transcript | study.com

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What is a Mixed Economy? - Definition, Characteristics & Examples - Video & Lesson Transcript | Study.com

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Yesterday in class, Sam was really struggling with his homework. He decided to ask his classmate Sara about America's economic system as he was really unsure about what type of system we have. Sara explained, 'Sam, the United States is a country with a mixed economy.'

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Advantage and disadvantages of COMMAND ECONOMY

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Advantage and disadvantages of COMMAND ECONOMY

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Command Economy Defined

A command economy is an economy in which the government has the power over the financial management of the country.

Imagine for a moment that your friend Sam told his sister Sara yesterday that he thinks a command economy is an economic system used in countries like Cuba and North Korea. Sara quickly thought about what the word 'command' means. The word command, quite simply, means to give orders. Therefore, it's the government that gives orders or has the power for the financial management of the country.

Characteristics

Let's look at some of the main characteristics inherent in a command economy.

1. The government is in control of the pricing of goods and services.

2. The government makes all decisions for finances in the country, such as hourly rate of pay for workers. The government may even assign people the jobs.

3. Since hourly rate of pay is regulated, also tending to be just enough to survive, people will tend to try and break the rules, such as sell stuff on the black market to make more money.

4. The state has absolute power over all resources.

5. The command economy has state-owned entities as well as privately-owned entities that are controlled by the state.

6. People in power, such as politicians, give orders to buyers, sellers, and investors.

Advantages

It might not seem like it, but a command economy does have some advantages. Advantages include:

1. low unemployment rates due to the regulation of jobs by the government.

2. Everyone has access to health care services and necessary services needed to live, and usually the fee is either low or free.

3. Decisions are made quickly by state or government officials.

Examples

Example 1: Cuba

Who can forget Cuba, as being a tightly-run country led by Fidel Castro's brother Raul Castro. There are many distinctive aspects to Cuba's command economy. For example, housing is free, but no one can own a home because the government owns all houses. Unemployment isn't an issue, but overcrowded public transportation is.

Like any command economy, salary is controlled by the government and isn't very high and the government has control over pricing. It's common for people to work another job without the government knowing since their salary is so strictly regulated and is only enough to survive. This is against the law and if caught, the person would face punishment. An example of this is making product and selling it under the table to other citizens. Cuba has foreign banks in the country, but they can't do business with them unsupervised. As for travel, some people are not allowed to leave the country.

Example 2: North Korea

Many will find a huge similarity to the Korea Party and the Party that George Orwell's famous novel 1984 describes. Of course there were people like Winston and Julia who were against this type of control. Sadly, when the government officials discovered their rebellious behavior, they were punished severely.

North Korea is no different. People can be killed in front of the crowd to bring fear to those who don't support the state or try to escape the country; it was reported in 2015 that over 1,400 public executions have occurred since the year 2000. They can also be put in prison and severely abused. There is even a watch for North Koreans in China right across the border.

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advantages & examples - video & lesson transcript | study.com

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Command Economy: Definition, Characteristics, Advantages & Examples - Video & Lesson Transcript | Study.com

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A command economy is an economy in which the government has the power over the financial management of the country. Imagine for a moment that your friend Sam told his sister Sara yesterday that he thinks a command economy is an economic system used in countries like Cuba and North Korea.

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Advantages and disadvantages of a FREE MARKET ECONOMY

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Advantages and disadvantages of a FREE MARKET ECONOMY

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What Is a Market Economy?

A market economy is an economy where most resources are owned and controlled by individuals and are allocated through voluntary market transactions governed by the interaction of supply and demand.

People exchange resources, such as money, for other resources, such as goods or services, on a voluntary basis in the market. The value of the resources exchanged is based upon how scarce each resource is and how many people want the resource. If the supply of a resource is low, but the demand is high, the price will tend to be high. If the demand is low and the supply high, the price will tend to be low.

Economic growth and development in a market economy is determined by the relative risks and rewards (or profits) that particular economic activity presents to individuals. If risks are too high and rewards are too low, then certain activities probably will not be pursued.

Government involvement in regulating market transactions in a market economy is limited to pretty much ensuring that the rules of the market are enforced and applied fairly to all participants. Additionally, government involvement in planning or directing economic development and growth is very limited. In practice, there is no such thing as a pure market economy because that would mean there would be no taxes on economic activities or government regulation of economic activities at all.

Advantages of a Market Economy

A market economy has several advantages:

Competition leads to efficiency because businesses that have fewer costs are more competitive and make more money.

Innovation is encouraged because it provides a competitive edge and increases the chance for wealth.

A large variety of goods and services are available as businesses try to differentiate themselves in the market.

Economic activity is encouraged because you need money to live and need to engage in economic activity (through employment or self-employment) to make money.

Freedom of individual choice is possible to the extent that the market provides options for work, developing a business, and purchasing goods and services (so long as you can afford them).

Disadvantages of a Market Economy

Market economies are also not without disadvantages:

Disparity in wealth and mobility exists in market economies because wealth tends to generate wealth. In other words, it's easier for wealthy individuals to become wealthier than it is for the poor to become wealthy.

Environmental damage results with no government regulations because it's usually more expensive to produce in an environmentally sound manner, which reduces profits.

There tends to be a reduced social safety net, including such programs as unemployment insurance, Social Security, and Medicare, because these programs are supported through taxation.

Poor working conditions can result due to a lack of government regulations because health and safety cost money, thus reducing profits.

Questionable priorities can result when the overriding decisions regarding production are profit-motivated rather than serving the needs of the people in society.

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disadvantages & examples - video & lesson transcript | study.com

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What is a Market Economy? - Definition, Advantages, Disadvantages & Examples - Video & Lesson Transcript | Study.com

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A market economy is an economy where most resources are owned and controlled by individuals and are allocated through voluntary market transactions governed by the interaction of supply and demand. People exchange resources, such as money, for other resources, such as goods or services, on a voluntary basis in the market.

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ECONOMICS IN THE NEWS - Problems of allocative efficiency in a mixed economy

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ECONOMICS IN THE NEWS - Problems of allocative efficiency in a mixed economy

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National Health Service (NHS) in UK cannot cope.

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The NHS is missing out on millions of pounds a year because of a "chaotic" system for recovering cash from overseas patients, MPs have warned.

In a report, MPs from the Commons Public Accounts Committee said they were "not confident" the Department of Health is taking the required steps to recover money from people who leave the NHS with unpaid bills after treatment.

The committee warned the NHS was failing to identify patients who should be charged and said the Government was not recouping enough money from European countries where reciprocal agreements are in place.

In 2014/15, the UK recovered just £50m from these countries but paid out £675m.

In evidence to the committee, the Department of Health admitted that "very little happened" for more than 30 years after legislation was first introduced to recover money from overseas patients in 1982.

As a result, trusts collect around half of the amounts they invoice.

The findings come a month after Freedom of Information responses from 104 trusts revealed overseas patients left the NHS with an unpaid bill of almost £30m in just one year.

Meg Hillier, PAC chair and Labour MP, urged the Government to "get a grip" over bill repayments.

She said: "It is simply unacceptable that so much money owed should continue to go uncollected.

"This is a problem for the health service as a whole and work to put it right must be driven by central government.

"We are concerned that financial progress to date does not reflect meaningful progress with implementing the rules and the Department for Health and NHS have much to do if they are to meet their target for cost recovery."

The report said the Department of Health must set out a plan for recovering more money by June.

In a statement, the department said it would announce "further steps very shortly to recover up to £500m a year by the middle of this Parliament".

It added: "Some hospitals are already doing great work and the amount of income identified has more than trebled in three years to £289m.

"However, there is more to be done to make sure that if people are not eligible for free care, they pay for it."

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Health tourism 'chaos' costing NHS millions every year, MPs say

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The NHS is missing out on millions of pounds a year because of a "chaotic" system for recovering cash from overseas patients, MPs have warned. In a report, MPs from the Commons Public Accounts Committee said they were "not confident" the Department of Health is taking the required steps to recover money from people who leave the NHS with unpaid bills after treatment.

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Quizlet week 2

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How economies allocate resources Flashcards | Quizlet

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Start studying How economies allocate resources. Learn vocabulary, terms, and more with flashcards, games, and other study tools.