Question

State the main features of a mixed economy.

Answer 1

1. Co-existence of Private and Public Sectors: Co-existence of public and private sectors is the main feature of a mixed economy. In public sector, industries of national importance are set up such as defence industries, basic industries, power generation, etc., while in private sector, consumer goods industries, agriculture and small-scale industries are developed. The sole objective behind the promotion of both sectors is to reap the benefits of both and to help each other.
2. Co-existence of Price System and Economic Planning: The main feature of such an economy is that both the price system and economic planning are in operation. Plans are made mainly for the public sector enterprises. For the private sector planning is in the form of various incentives and disincentives through monetary, fiscal, trade and other policies. Such a planning is termed as ‘planning by inducement’.
3. Price control and Rationing of Consumer Goods: If the price of a commodity in the open market is too high, the government imposes a price ceiling and supplies the commodity in limited quantities at reasonable prices through ration shops to the consumers. This is called rationing. In this way, the government imposes controls on both the demand and supply side of the market.
4. Role of the Government: In a mixed economy, there is a positive role of the government by way of some controls and regulations to regulate private sector. Private sector is regulated to promote the larger welfare interest of the entire economy even though non-intervention policy Laissez-faire is followed.
5. Reduction of Inequality of Incomes and Wealth: Another important feature of this economy is the use of various positive and negative incentives on the part of the government to remove disparities in income and wealth. The state, by adopting the system of progressive taxation, levy of death duties, etc., try to reduce unequal distribution of income and wealth.