Cambridge AS A Level Business Studies/ ZIMSEC Advanced Level Business Studies/ Business Enterprise Skills Notes: Mixed Economy

  • Society faces an economic problem
  • It has to answer three basic questions:
    • What to produce
    • How to produce and
    • For whom to produce?
  • It falls upon the government of that given society to come with a solution to this problem
  • This solution comes in the form of an economic system
  • There are three basic economic systems which are:
    1. Planned Economic system which is also known as a Command Economy
    2. The Free Market Economic system and
    3. The Mixed Economic system
  • The mixed economic system is a hybrid of the first two economic systems
  • It incorporates aspects of more than one economic system
  • Typically this means that in such an economy there are both state-owned and privately owned businesses
  • This system allows the economy to overcome the disadvantages of both the planned and free market economic systems
  • It takes from the best of both worlds
  • Most economies of the world including the economy of Zimbabwe, UK, France etc are mixed economies
  • It is important to point out that not all mixed economies are the same
  • Depending on the leanings of the government in power a mixed economy can lean towards planned economies, market economies or be right in the centre
  • Other features of a mixed economy include:
  • Resources are both owned by the government while some are in private hands
  • Market forces are used to determine prices for some products in the private sector under the watchful gaze of the government
  • The government sets prices for products in the public sector usually this involves prices for strategic products such as electricity, water and sanitation, defence etc
  • There is a public sector and private sector
  • Businesses in the public sector are owned by the government
  • Businesses in the private sector are owned by private individuals.


  • Enjoys advantages of both planned and free market economies while avoiding their drawbacks
  • Consumers have a choice for most products
  • The government is available to correct things like unequal distribution of wealth and unemployment
  • The government intervenes to reduce social costs
  • Monopolies are regulated and monitored
  • Duplication of resources is avoided when it is not needed
  • Businesses in the private sector can operate efficiently and respond quickly to consumer demands

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