Answer to Question #296094 in Microeconomics for Anike Todd

Question

Explain any two advantages and two disadvantages of the economic system used in your chosen country. (5)

 

Answer 1

Explain any two advantages and two disadvantages of the economic system used in your chosen country. (5)

The country chosen is the USA. It practices the mixed economic system.

The mixed economic system is described as an economic system that has features of both a market and a planned economy.

Two advantages.

1. Presence of government support. In a mixed economy, the public sector mitigates the drawbacks of a free market. Because of their poor profitability, private corporations may overlook some areas that are critical or provide social benefits. Government intervention, such as subsidies or ownership, may assist essential industries like education, military, and aviation in a mixed economy. The government also looks after less competitive businesses and disadvantaged people. For example, tax is an effective strategy for reducing inequality by distributing wealth. The government can also develop health care, retirement, and other programs to benefit society as a whole.
2. Incentives for innovation and efficiency in manufacturing. Businesses that can produce more economically are rewarded with larger revenues in a free market with competition. Companies are consequently compelled to commit resources in order to achieve production efficiency and innovation. Customers can get the greatest value possible for their money. Also, It provides commodities and services to those who need them the most. It provides for the measurement of supply and demand through pricing.

Two disadvantages

1. Private businesses asserting undue influence. Large firms may seek to lobby the government since private enterprises and government action are mixed in the same system. They may be able to sway legislation or actions in their favor. Intervention by the government also carries with it moral risks. Because they feel they are too big to fail, private businesses, particularly large ones, may take more risks. If they run into financial difficulties, the government will bail them out.
2. Inefficient public sector. Another disadvantage of the mixed economy is the inefficiency of the public sector. They might lose a lot of money. These losses will have to be borne by the people. In a mixed economy, the goal and aims of economic planning may not be met. Also, in a mixed economy, there is unhealthy competition between the private and public sectors.