Homework Help | Why are many mixed economies converting to market-based systems? How does the role of government change when a mixed economy transitions to a market economy?

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Mixed Economies

While there is no single definition of a mixed economy, one of the definitions refer to it as a free market with state intervention, an economic system bearing elements of a planned economy, or private enterprise with public enterprise. Therefore, it is a capitalist market with extensive state interventions | PLACE YOUR ORDER NOW AT writtask.com | are present features that are superior to mixed economies hence the desire by many to make the transitions. In a market-based system, the market responds and adjusts to the needs of the people through the forces of demand and supply. In this form of market system, the prices are determined by the law of supply and demand as opposed to being fixed by the state/government or other regulatory | PLACE YOUR ORDER NOW AT writtask.com | also rampant because government intervention and ownership means less accountability, innovation, responsibility, and | PLACE YOUR ORDER NOW AT writtask.com | leads to higher taxes and prices; slower growth; and higher | PLACE YOUR ORDER NOW AT writtask.com | offers consumers a wider variety of goods and services hence they have more choice as opposed to the mixed economy (Sandu et al., 2014).

As a result of competition in market-based systems, businesses become efficient by keeping costs low while | PLACE YOUR ORDER NOW AT writtask.com | because the aim of businesses in a market system is to make as much profits as possible and as a result, they are forced to become more efficient to produce superior products at | PLACE YOUR ORDER NOW AT writtask.com | that innovation is cultivated and this provides firms and countries a competitive edge (Sandu et al., 2014). Money becomes the motivation for firms and individuals which encourages them to innovate to gain a competitive edge. Innovation in mixed economies is not as lucrative as in market economies.

While the government has a central role in a mixed economy, this role diminishes in a | PLACE YOUR ORDER NOW AT writtask.com | firms and individuals play a more central role than that played by the government. In a market economy, the government is charged with the responsibility of enacting and implementing policies that regulate operations such as environmental protection laws and the protection of consumer rights. Unlike in mixed economies where the government has a significant influence on price and | PLACE YOUR ORDER NOW AT writtask.com | economy is purely governed by the private economy that allows voluntary and competing private individuals to plan, produce, and | PLACE YOUR ORDER NOW AT writtask.com | systems, the government does not own means of production unlike in the mixed economy where some means of production are owned by the government.

References

Faulhaber, H. R. (2009). The role of government in a market economy: reprise. Journal of Policy Analysis and Management, 6(4), 557-561.

Ikeda, S. (2002). Dynamics of the mixed economy: Toward a theory of interventionism. Routledge.

Sandu, I. S., Ryzhenkova, N. E., Veselovsky, M. Y., & Solovyov, A. Y. (2014). Economic aspects of innovation-oriented market economy formation. Life Science Journal, 11(12), 242.