chapter 15-mixed economic system Flashcards
what is the idea of mixed economic system
combination of both the planned and market economies
definition of maximum price
A maximum price occurs when the government sets a price below the market equilibrium price in order
to encourage consumption.
positive sides of maximum price policy
- price increase is limited
- protect consumer(from too high prices)
- encouraging consumption of good/service
negative sides of maximum price policy
- creates shortage of good in market
- may lead to black market for people desperate to get the good
definition of minimum price
the minimum price refers to the price set above the equilibrium price and is the minimum legal amount producers can charge for a good/service.
positive sides of minimum price
- producers are guaranteed a higher price above the market equilibrium price
- usually to encourage production (especially for agricultural goods due to unpredictable nature of the supply for these goods)
purpose of minimum wage
to boost income of low wage earners so they earn a livable wage and incentivize them to work.
positive sides of minimum wage
- lower income group can earn higher pays and get to enjoy better standard of living.(able to consume more goods/services)
negative sides of minimum wage
unemployment. qty dd of labor falls with higher wages. HOWEVER, when wages rise, people consume more, creating employment opportunities too.
what are the market based solutions for problems in a mixed economy.(7 of them)
- taxation
- indirect subsidies to producer producing merit good
- rules and regulations
- education
- privatization and nationalization
- direct provision
- resolving inequity
definition of privatisation
Privatization is the transfer of the ownership of assets from the public sector to the private sector.
definition of nationalization
nationalization is the purchase of private sector assets by the government.
