MEANING:

In a mixed economy, both free-market and regulatory forces are at work. Some see these forces as being at odds with each other; others feel that the economy works at its peak when both forces are working together. Whatever you believe, many countries, including the United States, have both systems at work simultaneously, and the balance between the two dictates how the economy, overall, will trend.In a free-market economy, balance is maintained strictly by market factors.

There is little or no regulation - it is a self-policing group of people and businesses. Sometimes this works, but as 2008 is showing, sometimes it doesn’t. Especially in a market-based economy, where people want to make a profit, some unscrupulous folks may enhance their own profit margin at the expense of others, such as the consumer.

The tendency toward profit may weaken the self-policing aspects, and the consumer may not receive the best deal.In a mercantile or socialist economy, the economy is controlled, to some degree, by the government. In a socialist economy, the government controls all aspects of the economy as a fundamental part of its structure; in a mercantile economy, the government controls some or most aspects of the economy for “the good of the economy”. While the United States is commonly referred to as having a capitalist or market economy, in reality it is a mixed economy, since the government does have some say in setting regulation.The advantages of a mixed economy are many.

Depending on the ratio of capitalistic elements to socialist or mercantile elements, there are many freedoms in a mixed economy. People may go into business for themselves, decide what they will produce or sell, and set their own prices. Business owners and merchants pay taxes, but they reap the benefits of those taxes through social programs, roads and other infrastructure elements, and other government services.However, mixed economies also have disadvantages, including the fact that businesspeople need to find their own markets for products, and that they are not in control of the taxes they pay.

Merchants will often complain of tax rates being too high for the services provided. Most economies today have moved to some variation of a mixed economy, though the balance toward a socialist, mercantile, or free-market economy can vary widely. In fact, most economies are in flux, moving from more regulated to less regulated over time, and sometimes swinging back in the other direction. But another strength of a mixed economy is that the balance can be altered to suit changing conditions, so mixed economy markets should endure for a long time to come.


The mixed economy refers to such an economic system wherein two the sector exist and function for achieving national objectives. The two sectors are the public sector and private sector. Both these sectors exist and function for achieving national objectives. Both these sectors make the economic system of the country.

In fact the mixed economy is the happy combination of private enterprise with government enterprise on the one side there is freedom of enterprise, private ownership and profit earning. On the other side there is government guidance and control so as to stop evil economic, pressures. In order to remove the effects of the capitalistic economy, mixed economy has been introduced. It prevails in most of the countries of the world.

ADVANTAGES:

The mixed economy is helpful in increasing national production in the country. Both public and private sectors work hard to bring about more production. The problems created by free enterprise and too much public control are solved through mixed economy. It provides freedom of enterprise ownership and profit earning as well as social welfare and political freedom. And all the national recourses are utilized under mixed economy.

DISADVANTAGES:

Mixed economy is half way house. It is not helpful in achieving optimal use of national resources. The mixed economy suffers from the drawbacks of both the capitalism and the socialism. Mixed economy seldom achieved progress. It suffers from continues back wardness. Under mixed economy wastage of different types occurs in the economy.

CHARACTERISTICS OF MIXED ECONOMY:

Mixed Economies Public and Private Sectors! Somewhere between the complete laissez-faire capitalism of the market economy and the strict central controls of the command economy lie the territories of the mixed economies. In practice, every economy in the world is some form of a mixed economy, but there are vast differences between them in terms of how much of each economic theory they support. Generally, however, mixed economies will have areas that are public (closest in principle to the command economy) and areas that are private (most similar to a market economy).

PRIVATE SECTOR:

These are areas of a nation's economy that are left to the self- regulating devices of the market economy. If the government is involved in this sector at all, it is only to function as a referee (to ensure fair competition between all competitors). In Canada, many areas of the economy are within the private sector. A quick trip to the mall will expose us to competition, profit motive, entrepreneurs, privately owned land, labor and capital, and the laws of supply and demand.

PUBLIC SECTOR:

These are areas of a nation's economy deemed too important or not profitable enough to be left to the private sector. Governments in mixed economies will get involved in the production of some goods or services in order to guarantee essential services to all citizens or to try and encourage private interest in the economy. In Canada, services like public transportation and postal service are examples of areas deemed too important to all citizens to leave to the instabilities of the marketplace. Recently, in a wave of privatizations (selling public sector companies to private owners), services like telephone companies, liquor stores and registry services have been taken from the public sector and placed in the private sector