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Analyse the mixed Market economy and determine how effective it is in allocating resources.

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Introduction

Analyse the mixed Market economy and determine how effective it is in allocating resources. According to Collins Dictionary of Economics, a mixed Market economy is "a method of organizing the economy to produce goods and services. Under this economic system some goods and services are supplied by private enterprise, and others, typically basic Infrastructure goods and services such as electricity, postal services, water supply, are provided by the State." The mixed market economy follows the Adam Smith's philosophy that one must "let the economy operate according to natural laws". This is also known as the "laissez-faire" theory, which the market economy follows, but the major set-up which it operates is related to the self-interest of the individual, which includes the aim of one getting the most profit as possible. ...read more.

Middle

This is definitely another advantage of the economy, because in parallel, people are able to achieve a higher standard of living. Lastly, there is a limited role for the government in a market economy, and this definitely offers many advantages to the system. The government is only allowed to regulate firms (to make sure there are no monopolies, which means that there is more chance to have a higher income), to tax and spend (meaning that in the end, the individual gets the luxury of welfare), and to legislate certain issues (such as determining a minimum wage law, which ensures that one will have enough money for the bare essentials). All of these factors then combine with others, such as the price mechanism to create a very successful form of economy, that the majority of the world is pleased with. ...read more.

Conclusion

In other words the price system in market systems improves the allocation of scarce resources. The allocation in mixed market economies is very effective because not only does it respond to the demand of the consumers but it also ensures that the resources are used as efficiently as possible. History has proven that a mixed market economy is the most successful market system. The aim of each country is to get as close as possible to its production possibility frontier, because I want a higher standard of living. As seen in the past, Soviet Russia had no unemployment; The U.S.A allocated his resources much better than the Soviet Russia and achieved a much higher standard of living. This was because the U.S.A. had an enterprise spirit, adapted the free market economy and people were risk taking. Sources Used * Collins Dictionary of Economics * Introductory Economics by GF Stanlake and SJ Grant * Economics A new Approach by A.G Anderson * Economics from a global perspective by Alan Glanville. ...read more.

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