Chapter-15 Flashcards
Mixed economic system (10 cards)
What is a mixed economic system?
A mixed economic system is an economy in which both the private and public sectors play an important role.
How does the government influence economic activity in a mixed economy?
i) The government considers the costs and benefits of decisions to benefit society.
ii) It can maintain essential services, such as railways, even if they are unprofitable.
iii) It encourages beneficial products through subsidies, information, or laws.
iv) It discourages harmful products through taxes, information, or laws.
v) It funds essential public services like defense.
vi) It prevents private sector firms from exploiting consumers with high prices.
vii) It aims to maximize resource use and employment.
viii) It invests in long-term infrastructure and capital goods.
ix) It supports vulnerable groups and reduces income inequality through taxation.
What is rationing?
A limit on the amount that can be consumed.
What is a lottery?
The drawing of tickets to decide who will get the products.
What is nationalisation?
Moving the ownership and control of an industry from the private sector to the government.
What is a public corporation?
A business organisation owned by the government which is designed to act in the public interest.
What are the advantages of state-owned enterprises?
i) Decisions are based on full costs and benefits.
ii) Can influence economic activity by increasing output.
iii) Prevents market abuse in industries with natural monopolies.
iv) Easier planning and coordination.
v) Ensures basic industries survive, charge low prices, and maintain quality.
What are the disadvantages of state-owned enterprises?
i) Difficult to manage and control due to large size.
ii) May become inefficient, with low quality and high prices.
iii) May require subsidies, leading to opportunity costs.
What is cost-benefit analysis (CBA)?
A method of assessing investment projects by considering both social costs and benefits.
What are multinational companies (MNCs)?
Companies that produce in more than one country.
