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Mixed economies

1. A mixed economy contains elements of both market and planned economies. At one extreme we have a command economy, which does not allow individuals to make economic decisions, at the other extreme we have a free market, where individuals exercise considerable economic freedom of choice without any government restrictions. Between these two extremes lies a mixed economy.

2. In mixed economies some resources are controlled by the government whilst others are used in response to the demands of consumers. Technically, all the economies of the world are mixed. Some countries are nearer to command economies, while others are closer to free market economies.

3. The aim of mixed economies is to avoid the disadvantages of both systems while enjoying the benefits that they both offer. So, in a mixed economy the government and the private sector interact in solving economic problems. The state controls the share of the output through taxation and transfer payments and intervenes to supply essential items such as health, education and defence, while private firms produce cars, furniture, electrical items and similar, less essential products.

4. The UK is a country with mixed economy. Some services are provided by the state (for example, health care and defence) whilst a range of privately owned businesses offer other goods and services.

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  • Some countries have more features of command economies, while others are closer to free market economies.
  • In general all the economies of the world are mixed having the features of both market and command economies.
  • A mixed economy is an attempt to avoid the disadvantages of market and command economies and to use the benefits they both offer.
  • A mixed economy with the features of market and command economies allows the state and the private sector to interact in solving economic problems.

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