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The mixed market economy.

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Introduction

This essay analyses the Mixed Market Economy and determines how effective it is in allocating resources. In order to discuss this, the essay includes the features of the Command Economy with the advantages and disadvantages. In contrast the Market Economy is discussed with its advantages and disadvantages emphasizing on the Price Mechanism. Then the Mixed Market Economy is analysed referring to its advantages and disadvantages. Fourthly, the Allocative Efficiency of resources in the Mixed Market Economy is discussed. Followed by the paragraph about Market Failure and how government intervention can make the Mixed Market Economy more efficient. Lastly, a real world example of a mixed market economy is given to support the argument. The Command Economy is also called a centrally planned economy because the state decides what to produce, how to produce and for whom to produce. Therefore the state owns the factor of production. The aim of the Command Economy is greater equality of income and wealth and everybody has identical standard of living. The advantages of the Command Economy are that unemployment doesn't exist because workers are allocated to jobs by the state. Also there is more economic certainty in a command economy because for example the income remains the same after an industrial accident; this contributes to the welfare of the country. ...read more.

Middle

the monopolistic structures in the market. The market is the best way of allocating resources but it still brings along many disadvantages. So there must be a "better" economic system than the Market Economy. The "better" economic system is the Mixed Market Economy, which combines the advantages of the Market Economy and the Command Economy. In the private sector (market) goods and services are provided through the market mechanism, which combines the demand of the consumers and the self-interest of the suppliers (profit making) to decide what is to be produced. In the Mixed Market Economy the state provides public goods like law, defence etc. and merit goods like education and health care. The government can provide these services through government revenues e.g. taxing people's income (direct) and spending (indirect). Like in the Market Economy, people in the Mixed Market Economy who own most valuable factors will gain a larger share of goods produced in the private sector than those who are relatively poor. Also consumers have a grater choice of what they want to buy due to the competition of the firms in the market. Another aspect of the Mixed Market Economy is that individuals have an overall greater choice, which leads to a higher level of welfare because individuals can allocate their factors of production to the use which maximises their utility or welfare. ...read more.

Conclusion

competition policy, industrial policy, price support system etc. A real world example for Mixed Market Economy is the United Kingdom, where the allocation of resources is efficiently shown by Table1. "In general, 2000 was a year in which economic performance in the UK was highly satisfactory. Growth picked up, inflation remained low, and unemployment fell to historically low levels"4 The table shows that in year 2000 the GDP growth has become slightly higher 3.1% and also the inflation rate remained low at 2.1. Also unemployment become less 1.1 and manufacturing has increased to 1.8. This shows that the allocation of resources works well in the UK. This essay has argued that the Mixed Market Economy combines the advantages of the Market Economy mainly the price mechanism, and the advantages of the Command economy mainly the government intervention, to bring the best together. The Mixed Market Economy is a "processed" version of the Market Economy, making the allocation of resources more efficiently through government intervention in Market Failure. Also other disadvantages in the Market Economy have been reduced by introducing the ideas of government intervention of the Command Economy, including reducing unemployment and welfare. Most of the rich developed countries in the world including Germany, UK, France etc are mixed market economies, which indicates that the Mixed Market Economy is the "best" economic system at allocation resources existing. 1 Economic Review, September 2002 2 Economic Review, September 200 3 Vilfredo Pareto 4Economic Review, April 2001 Lie-Tin Wu IB Economics HL1 Economics Essay Mr. Buckley ...read more.

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