What Does a Mixed Economy Mean?

An economy is a place of exchange, production and distribution, of products and services, by many agents. By itself, it’s defined as ‘a social complex characterized by the operation of the production process and of the exchange of goods’. Economists are concerned with the ways in which individuals and firms interact to meet their goals, values and expectations. In short, it’s about economics.

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What Does a Mixed Economy Mean?

An economy is a place of exchange, production and distribution, of products and services, by many agents. By itself, it’s defined as ‘a social complex characterized by the operation of the production process and of the exchange of goods’. Economists are concerned with the ways in which individuals and firms interact to meet their goals, values and expectations. In short, it’s about economics.

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For most countries, economics means national economic activity that, while affecting individuals, firms and even governments, is not too intrusive. In the United States, economics can be considered the study of how domestic institutions and policies affect the functioning of the economy. Economics has four components – production, distribution, savings and investment. They each interact to determine how the economy works. So, what does the economy mean?

In business, economy refers to the way prices of goods and services are set. In the economic growth, prices of goods and services are increasing so that there is more income for owners of capital and labor. Economists therefore believe that when there is economic growth, prices of goods and services also increase, allowing people more purchasing power. But not everyone shares this rise. There are those who suffer from poverty, while in others, incomes are soaring. It is because there are so many people getting rich at the same time; the incomes of poor people do not keep pace with those of the rich.

In addition to economic growth, there are changes in other aspects of life such as technology and education. Technological change means the progress of the industries providing goods and services. And in education, we can include changes in curriculum and structure of schools, resulting to more efficient instruction, assessment and learning. Resource market means the sales and purchases of goods and services that make up the economy. The presence of these three aspects in a simple economy means that the government, through taxation and trade liberalization, keeps businesses, consumers and institutions in check.

A planned economy functions according to a specific plan by the political leaders. This type of economy aims to meet the economic needs of the community. This type of economy aims to provide goods and services on demand through a planned distribution system and allocation of resources to businesses. Although this type of economy has many positive effects on society, there are also some negative effects that traditional economies suffer.

In the planned economy, prices are set depending on the needs of the consumers. In free-market economy, the prices of goods and services are affected by competition among producers. On the other hand, the distribution of wealth in a planned economy is controlled by political factors such as property laws, inheritance taxes and other economic considerations. In traditional economies, the consumers determine the prices of goods and choose them based on their needs and tastes, without considering the impact of these prices on other sectors or the political economy.

In a mixed traditional economy, a great depression can occur due to a great imbalance between industrial production and consumer demands. Great depression occurs due to a shortage in the supply of basic raw materials and employment prospects. Due to the great depression, industrial production falls, which results to a reduction in employment. Businesses are forced to reduce production levels and sell out products to cover their losses. As the situation worsens, the consumers that remained in employment face shortages of essential goods and services that force them to seek employment in other fields.

All three types of economies can be classified as mixed economies because they can be characterized by a mixed economic system, with mixed economy means that there is a considerable presence of both land and labor in a society. Mixed economies imply that both the land and labor are employed, thus affecting the distribution of wealth. As discussed earlier, the nature of distribution of wealth in traditional economies is determined by how land and labor are used, while in mixed economies, both land and labor are employed, but with different types of land and different types of labor. All three types of economies have their own advantages and disadvantages, which depend on the way they were established, whether by indigenous peoples or developed countries, and the nature of their consumption market.

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