Difference Between Market Economy and Mixed Economy

Market Economy vs Mixed Economy

Ever wondered why in some markets the businesses do well as opposed to the other, where strict government regulation and intervention prevents these? United States has a mixed economy because they have both private owned companies and government playing key role in the market.

Market Economy

Market Economy as per the Economics dictionary refers to an economic system in which the allocation of resources is determined solely by supply and demand in the market. Having said that, there are limitations on market freedom in some countries where governments intervene in free markets to promote competition, which might not be there otherwise.

Mixed Economy

Mixed Economy refers to the market economy where both private and public enterprises participate in economic activity. E.g. US have a mixed economy since both private and government businesses play important roles. This economy provides the benefit to the producer, as to what business to go into, what to produce and sell, also set the prices. Even though business owners pay tax, they get this back as a benefit through social programs, infrastructure benefits and other government services. But still business people need to find their own markets for products. And further they don’t have control over however tax they pay.

What is the difference between Market Economy and Mixed Economy? · In the Market Economy consumers and businesses can take free decisions on what to purchase and what to produce. Whereas within Mixed Economy the production, distribution and other activities are limited for free decisions and both private and government intervention is visible. · Market Economy has less intervention of the government as opposed to the Mixed Economy.

Conclusion

Increased efficiency exists in the Market Economy as more competition exists between different. As Mixed Economy has both public and private sector working hard, there is increase in national production.

Today most of the industrial countries have mixed economies where the government plays a larger role in the economy with the private companies.