Disadvantages Of Mixed Economic System

1815 Words8 Pages
INTRODUCTION
The problem of scarcity is one common to all economies regardless of its wealth. This requires choices to realistically be made, as determined by the country’s economic system. The economic system basically refers to the allocative mechanism by which the people, businesses and government of a country make choices. Economists have recognized three distinct types of economic system – the capitalist economy, the socialist economy and the mixed economy (Bamford & Grant 2010).
In a capitalist economy, households and firms usually decide the allocation of resources. They interact as buyers and sellers in the market for goods and services. Prices and the operation of the price system underpin this interaction; in turn, prices act to indicate
…show more content…
At this time, the British government was responsible for substantial areas of public expenditure such as health care and education, the direct operation of nationalized industries such as coal and gas, as well as for providing support for large areas of manufacturing, such as vehicle production, in partnership with the private sector (Bamford & Grant 2010), while most decisions such as daily purchases are left for the public to make themselves. Some of the advantages of the mixed economy system include the fact that the government provides the essential services while encouraging the private sectors to continue building profits. The competition that arises from the private sector keeps prices low, ultimately benefiting the consumers and influencing their choices. Inefficient business behavior can also be controlled through the implementation of this system, minimizing the damage. On the contrary, its disadvantages are that the heavy taxes incurred reduce incentives provided for the public in the private sector to work hard and make profits. The government is also less efficient than the private sector; hence the essential services provided will not have the best quality. An excessive control over business activity via taxes incurred can also add to a firm’s costs and discourage
Get Access