INSURANCE AND RISK
NAME OF LECTURER MR MACHOKOTO
PRINCIPLES OF ECONOICS (CBA 1104)
DUE DATE 30 SEPTEMBER 2013
Mixed economy is the hybrid of free market and command economy. In mixed economy both the private and public sector need to co-exist to overcome the weakness of one another. Most countries practice mixed economy for a number of reasons as mentioned below.
Where there is free market enterprise economic forces are unfettered. Supply and demand determine the prices of goods and services. Prices in turn tell businesses what to produce, if the people want more of a particular good than the economy is producing the price of the good rises. That catches the attention of new or other companies that sensing an opportunity to earn profits, start producing more of that good. If people want less prices fall and competitive producers either go out of business or start producing different goods. This is more efficient as compared to command economy were the government which relies on tax revenues, is far less likely than private businesses to heed price signals or to feel the discipline imposed by market forces. However there are limits to free enterprise, some services are better performed by the public rather than the private sector.
Private enterprise is profit oriented; they are very responsive to market. In the period of boom strong demand for their goods and services will lead to rise in employment. On the other hand in recession companies will not tolerate excess labours as keeping idle workers will raise production cost. Therefore private workers stand a chance to lose employment, at such times the government regulates business or puts legal anti-trust constraints on such business behavior. This hence shows the need for both the public and...
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