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In a socialist economy, the means of production are owned and operated by the
State. All decisions regarding production and distribution are taken by the central
planning authority.
The following are the basic characteristic features of socialism:
1 Social Welfare Motive;
2 Limited Right to Private Property;
3 Central Planning;
4 No Market Forces.
Advantages of Socialist Economy:
efficient use of resources; economic Stability; maximisation of Social Welfare;
absence of Monopoly; basic needs are met.
Disadvantages of Socialism:
bureaucratic expansion; no freedom; absence of technology; absence of competition
makes the system inefficient.

IV Mixed Economy.
In a mixed economy, both public and private institutions exercise economic
control. The public sector functions as a socialistic economy and the private sector as
a free enterprise economy. All decisions regarding what, how and for whom to
produce are taken by the State. The private sector produces and distributes goods and
services. It manufactures consumer and capital goods in the interest of public welfare
The main features of mixed economic system are:
1 Co-existence of Public and Private Sectors;
2 Consolidation of merits of Capitalism and Socialism;
3 Planning.
Advantages of Mixed Economy:
efficient resource utilisation; prices are administered; social welfare.
Disadvantages of Mixed Economy:
lack of co-ordination; red–tapism and delay by Public Sector; economic fluctuations.

ASSIGNMENTS

Choose the correct answer.
1 The basic economic problems are common to:
a) Capitalism;
b) Socialism;
c) Mixed economy;
d) all the above.

2 Traditional economy is a:
a) Subsistence economy;
b) Market economy;
c) Command economy;
d) Monetary economy.

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