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ECONOMIC SYSTEMS
FEATURES
MARKET ECONOMY
COMMAND ECONOMY
MIXED ECONOMY
Ownership of property :
Private ownership
Government  ownership
Private + Public (govt.) ownership
Motive or objective:
Profit maximization
Collective welfare social
Private Sector   Profit maximsation
Public Sector    Collective Welfare
Allocative mechanism:
Price mechanism ( demand and supply)
Rationing mechanism
(central planning & quota’s )
Private Sector Price mechanism
Public sector  Rationing  mechanism            
Freedom of choice:
(In Production & Consumption)
Freedom  of choice
 No freedom  of choice
Private Sector     yes
Public sector       no
Competition:
Yes
No
Private Sector     yes
Public sector       no
Role of government:
(In allocation of resources i.e.)
Minimum role of govt. in economic affairs. Only limited to maintain  law & order in the country.
All economic & non-economic affairs are in the hands of govt.
Govt. limit its role to the provision of necessary goods & services & regulate  private sector for social welfare..
Variety of goods &  services:
Yes
No
Private Sector     yes
Public sector       no
Quality  of goods &  services:
High quality
Poor quality usually
Private sector        High quality
Public sector   Poor quality usually
Response to changes in demand: Consumer sovereignty
Quick response to changes in consumers preferences.
slow  or no response.
Private Sector      Quick response
Public sector         Slow response
Efficiency:
Producing most desirables goods (allocative efficiency) with least cost methods(productive efficiency)
*efficient allocation of resources usually because of existence of profit motive
*Sometime inefficient .e.g. private Monopolies.
Inefficient allocation of resources because of absence of profit motive.
Inefficiency of private sector is minimized by govt. policies.
Shortages & surpluses:
(Shortage = Demand > Supply)
(Surplus = > Supply > Demand)
Price mechanism clears markets and there are no shortages  & surpluses.
Central planning is unable to guess exact quantities demanded  , Shortages & surpluses are present.
Private sector    No shortages & surpluses
Public sector      Shortages & surpluses are present.
Merit goods:
e.g. Healthcare, education etc
Underproduction & under consumption.
Socially optimum
*private sector    underprovision
*Missing markets of merit goods will be supplied by govt. provision.
Public goods:
.e.g. street light national defense
non-marketable and therefore missing
provides public goods from central finance.
Public sector provides public goods.
Demerit goods:
e.g. alcohol, drugs, cigarettes etc.
overproduction & over consumption.
Less or no demerit goods
govt. discourage consumption & production will be  by high taxation and legal  actions.
Distribution of income  & Wealth:
unequal distribution
Even distribution
Progressive taxation and welfare payments  to poor will reduce the disparity between rich & poor.
Useless duplication of goods & services:
Yes
No
may be  in private sector but not in public sector.
Negative externalities:
(e.g. Noise , pollution , Congestion, etc)
More than socially optimum level
Socially optimum
Govt. will regulate the emissions  of negative externalities by taxes and  legal actions
Necessities  & luxury goods:
Less necessities  & more luxury goods
more necessities  & less luxury goods
Public sector  will provide necessities to even those who can’t pay.
Private Monopolies:
develop and exploit consumers by setting high prices
No private monopolies are there in command economy.
Govt. regulates private monopolies and protects consumer’s from exploitation.
Existence in real world:
No pure market economy
No pure command economy
All economies  are mixed but proportion of private & public sector vary from country to country.
Other terms:
Free economy, Capitalism, free market economy, laissez faire.
Communism, socialism, planned economy, centrally planned economy.


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