MIXED ECONOMIC SYSTEM
Mixed economic system refers to the type of economic system which involves both public and private ownership of the major means of production like capital, land and other related means of production. Therefore decisions on important economic issues involve some forms of planning by private as well as public enterprises and interaction between the government business and labor through market mechanism.
FEATURES OF MIXED ECONOMIC SYSTEM
- Some resources are owned by individuals and some are owned by government.
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Decisions regarding production.
The production of commodities is partly made by individuals and partly by the government.
- There is joint venture in the ownership of business firm. The government tends to have shares with the private investors in running businesses.e.g. TBL in Tanzania.
- The role of the government is to regulate the private sector to work for national interests and not for their personal interests.
- There is a system of price mechanism and planning authority. All are important in economic decisions and planning.
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There is a relative high freedom of choice for both consumers and producers.
ADVANTAGES OF MIXED ECONOMIC SYSTEM
- The system is effective in controlling market failure, since the price mechanism does not efficiently provide public goods like education, health, road, etc. The government corrects the weaknesses by providing free goods.
- Control of efficiency in production and wastage in the allocation of resource. The system involves some kind of planning in the case it can control wastage of resources also increase of freedom in allocation of the resources competition which also increases efficiency in production.
- Classes are minimized as the state take cares of the under privileged by redistributing wealth in the economy.
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There is wider freedom.
A private sector is allowed to produce goods and services that give consumers wider range of goods and services to consume unlike in pure socialism.
THE ROLE OF THE GOVERNMENT IN MIXED ECONOMIC SYSTEM
- To establish the framework of rules and regulations.
- To re nglish-swahili/distribution” target=”_blank”>distribution income. That is to reduce the gap between the rich and poor. E.g. high taxation, subsidization etc.
- To maintain laws and orders in the economy.
- To promote high rate of economic growth and economic development.
- To stabilize price in the case of inflation or deflation.
- To provide public goods such as;-education, health and other related public good
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THE TRANSITION PERIOD
Definition: a transition period is the period between any two economic systems such that one system (the old system) is being replaced by another system (the new system).This means that the economic system has not completely collapse yet and the new system is just in the process of being established
It is a period which is characterized by the remnant features of the old economic system and the new features of the new economic system. For example;-before socialism was not well established in Russia element of capitalism were not completely wiped out in the young socialist economy
IMPORTANCE OF THE TRANSITION PERIOD
- It is the period of making adjustments. That is it is a period when the weakness of the old system should be left out and the good element of the old system should be in the new system
- It is a period of learning from the experience of other economic system in the past and present in order to determine their weakness and strengths
- It is the period experimenting on how the new ideas will be introduced and how these ideas will be accepted by the general public
- It is a period of action and seriousness with the aim of achieving the predetermined goals/objectives
- The transition period is necessary since it is a period of making the society aware of intended objective change and how these changes will be made.
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