A Mixed Economy is that economy in which we can see coexistence of both private and public sector enterprises. It is the combination of Socialistic and Capitalistic features. The best example for this is India.
In a Mixed Economic system, the resources are owned by both the Government and Private individuals. Here, some areas of economic activities are totally governed by the Government and other sectors are open to the private sector also.
The Government involves in those activities which promote maximum social and economic welfare without any profit motive. The Private sector functions with the intention of maximizing profits. Here we find dual pricing system. For example, the supply of Rice through Government Fair Price shojis is low when compared to the private provision stores.
In this type of economy, the Government takes the responsibility to run certain essential sectors like Railways, Printing of currency notes, Atomic energy, public parks etc. Here, the basic problems are solved both by Public and Private Sectors.
Regarding what to produce,-consumers play a main role. But, the Government also interferes by imposing tax or giving subsidy. The problem of how to produce, the private sector will follow the least cost effective technology to maximize profit and public sector will select , the technology on the basis of composition of resources. The problem of for whom to produce depends on both the purchasing power of consumers and the Government policy towards weaker sections of society.
| Mixed Economy |
Market Economy |
| (i) It is that economy where we can see both Public and Private Sector functioning. |
(i)It is that economy where we can see only Private sector operating. |
| (ii)Price mechanism do not play much role |
(ii)Price mechanism plays a major role. |
| (iii)It is a partially restricted economy |
(iii)It is free economy |
| (iv)Both Private and Public Sector leads the economy. |
(iv)Private sector leads the economy |
| (v)It is both profit motive and welfare motive. |
(v)It is profit motive only |
