AP ECONOMICS Topic : Mixed economy | features, advantages and disadvantages

Mixed Economy

A mixed economy is an economic system that incorporates aspects of more than one economic system. This usually means an economy that contains both privately-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and planned economy characteristics. This system overcomes the disadvantages of both the market and planned economic systems.

Features

• Resources are owned both by the government as well as private individuals. i.e. co-existence of both public sector and private sector.
• Market forces prevail but are closely monitored by the government.

Advantages

• Producers and consumer have sovereignty to choose what to produce and what to consume but production and consumption of harmful goods and services may be stopped by the government.
• Social cost of business activities may be reduced by carrying out cost-benefit analysis by the government.
• As compared to Market economy, a mixed economy may have less income inequality due to the role played by the government.
• Monopolies may be existing but under close supervision of the government.