(a) What is an Economic system? (b) Explain any three characteristics of a mixed economic system. (c) State any two disadvantages of a mixed economic system...

Answer Details

(a) Meaning of an economic system. An economic system is the organised way in which a society uses its scarce resources to decide what goods to produce, how to produce them, and for whom they are produced, that is, how production, distribution, and consumption are arranged in that society.

(b) Three characteristics of a mixed economic system. A mixed economy combines features of capitalism (free market) and socialism (state control).

1. Co-existence of private and public ownership. Individuals own and run private businesses while the government also owns and controls certain key enterprises and utilities.
2. Government intervention in the market. Prices are largely determined by the forces of demand and supply, but the government intervenes through regulation, taxation, subsidies, and price controls to protect the public interest.
3. Pursuit of both profit and social welfare. Private firms produce for profit, while the state provides essential services (such as education, health, and roads) for the welfare of citizens rather than for profit.

(c) Two disadvantages of a mixed economic system.

• Conflict between the two sectors. Excessive government control and regulation can discourage private investment and initiative, while too little control lets private firms exploit consumers, so striking the right balance is difficult.
• Bureaucracy and inefficiency in the public sector. Government-owned enterprises are often poorly managed, slow, and wasteful, leading to inefficiency and losses.