chapter 15-mixed economic system

Question 1

what is the idea of mixed economic system

Answer 1

combination of both the planned and market economies

Question 2

definition of maximum price

Answer 2

A maximum price occurs when the government sets a price below the market equilibrium price in order
to encourage consumption.

Question 3

positive sides of maximum price policy

Answer 3

• price increase is limited
• protect consumer(from too high prices)
• encouraging consumption of good/service

Question 4

negative sides of maximum price policy

Answer 4

• creates shortage of good in market
• may lead to black market for people desperate to get the good

Question 5

definition of minimum price

Answer 5

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.

Question 6

positive sides of minimum price

Answer 6

• 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)

Question 7

purpose of minimum wage

Answer 7

to boost income of low wage earners so they earn a livable wage and incentivize them to work.

Question 8

positive sides of minimum wage

Answer 8

• lower income group can earn higher pays and get to enjoy better standard of living.(able to consume more goods/services)

Question 9

negative sides of minimum wage

Answer 9

unemployment. qty dd of labor falls with higher wages. HOWEVER, when wages rise, people consume more, creating employment opportunities too.

Question 10

what are the market based solutions for problems in a mixed economy.(7 of them)

Answer 10

• taxation
• indirect subsidies to producer producing merit good
• rules and regulations
• education
• privatization and nationalization
• direct provision
• resolving inequity

Question 11

definition of privatisation

Answer 11

Privatization is the transfer of the ownership of assets from the public sector to the private sector.

Question 12

definition of nationalization

Answer 12

nationalization is the purchase of private sector assets by the government.