Market, Command, and Mixed Economies

1

Mixed Economies

◼ Most modern economies are mixed.
◼ Why?

� both market and command economies have

flaws

� market economies are unstable

� command economies are too complicated

to successfully plan and control

◼ For these reasons, there are no pure

command or pure market economies

Multiple Select

Why are most modern economies mixed?

• Market and Command economies are flawed

• Market economies are unstable

• Command economies are too complicated

• None of these are correct

2

Mixed Economies

◼ In a mixed economy

� both the government and individuals

– are involved in making economic

decisions

◼ Four types of mixed economies

� mixed command economy

� transition economy

� mixed socialist economy

� mixed market economy

Multiple Choice

How many mixed economies are there?

• 1

• 2

• 3

• 4

3

Mixed Command

Economy

◼ Mixed command economy

� command economy with some market

elements

◼ During much of the 20th century, China

was a communist country with a pure
command economy

� but the Chinese economy had difficulty

meeting the needs of its people

Multiple Choice

What is a mixed command economy?

• A command economy with some market elements

• A market economy with some command elements

4

◼ China had over 1.3 billion people in

2006, more than any other country

5

Mixed Command

Economy

◼ In 1978, the Chinese government

� started reforms to bring aspects of a

market economy to China
– less government involvement in

farming and industry

– individuals allowed to start and run

small businesses

Open Ended

What kind of changes did China make in their economy that incorporates some market elements?

6

Transition Economy

◼ Transition economy

� changing from command to market

◼ The Soviet Union was one of the great

command economies of the 20th century

� its economy had trouble providing for the

needs of its citizens

� economic and other problems caused the

Soviet Union to break up in 1991

� it became 15 independent countries

Multiple Choice

What is a transition economy?

• When an economy changes from market to command

• When an economy changes from command to market

7

◼ Many of the newly independent

countries have transition economies

8

Mixed Socialist

Economy

◼ Mixed socialist economy

� democratic political system

� economy that combines market and

command elements

◼ France, Sweden, and other countries

with a mixed socialist economy are
called

� social democracies

Multiple Choice

Which country has a mixed socialist economy?

• USA

• Sweden

• Russia

• Japan

9

Mixed Socialist

Economy

◼ Market/Democratic elements

� citizens vote and have many rights

� citizens can start and run businesses

◼ Command/Socialist elements

� government collects a large percent of

income as taxes, to use to ensure a
decent standard of living for everyone

� government owns and operates major

industries

10

Mixed Market

Economy

◼ A mixed market economy is a market

economy with some command elements

◼ The United States is a mixed market

economy because government

� helps people in need through social

security and welfare benefits

� regulates business

� collects income taxes, but not as much as in

a social democracy

Open Ended

How is the US a mixed market economy?