A mixed economy incorporates both the state and private sector in economic management, distinguishing it from planned or market economies. The determination of market prices involves contributions from both the government and the market. The government assumes responsibility for supplying public goods such as national defense and administration that cannot be fulfilled solely through market mechanisms but are vital for consumers.
Government is responsible for distributing resources to private goods and public goods. Private goods are limited to individuals or specific groups, while public goods are accessible to everyone. Additionally, only those who have enough money can obtain private goods, unlike public goods which are open to all regardless of their financial situation. Moreover, the government’s tax and expenditure policy plays a critical role in ensuring a just and equal distribution of income among households.
The government enacts policies that impose taxes on wealthy individuals and allocate resources to programs primarily focused on aiding disadvantaged populations. These policies seek to stabilize the economy in reaction to various fluctuations, including periods of economic growth and decline. Through modifying levels of aggregate demand, the government strives to prevent both inflation and unemployment.
Resource allocation differs across economic systems. In a free-market economy, resources are distributed based on individuals’ and groups’ capacity and willingness to pay. The principles of the US economy abide by this approach. Conversely, in a command economy like the USSR, resource allocation is determined by government control. A mixed economy combines elements of both methods where some resources are allocated through the free market while others are assigned by the government. For instance, subsidies granted by the government within an otherwise free market economy exemplify how resource allocation is managed in a mixed economy.
In countries such as the USA, UK, Russia, China, Cambodia, Peru, and Vietnam, a mixed economic system is implemented. This involves allocating economic resources to both private sectors and government in order to benefit the nation’s economy as a whole. If one entity fails to meet public demand, another can step in to maintain economic balance throughout the country.
