economics chapter 15: mixed economic system

mixed economic system

an economy in which both the private and public sectors play an important role

rationing

a limit on the amount that can be consumed

lottery

the drawing of tickets to decide who will get the products

nationalisation

moving the ownership and control of an industry from the private sector to the government

public corporation

a business organisation owned by the government which is designed to act in the public interest

cost benefit analysis (CBA)

a method of assessing investment projects which takes into account, social costs and benefits

multinational companies (MNCs)

companies which produce in more than one country

maximum prices

government may set a maximum ceiling on the price in order to enable the poor to afford basic necessities

minimum prices

to encourage production of a product, a government may set a price floor as it represents the lowest price producers are allowed to charge

advantages of mixed

1. government takes into account all the costs and benefits that will arise from their decisions

2. help vulnerable groups ensuring basic necessities

3. create distribution of income by taxing the rich at a high rate

disadvantages of mixed

1. risks attached

2. no guarantee that it will perform better than the other two types of systems

3. market failure can occur and government intervention may make the situation worse