Mixed Economy

There are three types of management in economies. An economy may be almost totally planned, as it was in the Soviet Union. An economy may be almost totally unplanned, as it is in the USA. Or an economy may be a combination of planning and freedom of operation. Examples of the latter are Japan and South Korea.

In a planned economy the government decides what goods are to be produced and how they are to be marketed. Governments set all the priorities, and the producers are to follow the directions given to them.

In a partially planned economy such as Japan’s, the government often encourages industry and helps it with subsidies. Government also makes investments and regulates trade.

The United States is an example of an unplanned economy. But it has a lot of government intervention in economic activity. As the economy of the United States grew, and as government and its importance increased, the government policy at every level acquired greater importance for the economy.

But the economy of the United States may be called unplanned because the government does not regulate what will be produced and how it will be marketed. These decisions are left to the producers. Even the great amount of government regulation that has emerged since the Great Depression has not turned the economy of the United States into a planned economy.

The name of the American economic system is capitalism. Another name for it is the free market economy.

TEXT B

Read the text and say whether the statements given below the text are true or false and if they are false say why.

Market

The term market, as used by economists, is an extension of the ancient idea of a market as a place where people gather to buy and sell goods. In former days part of a town was kept as the market or marketplace, and people would travel many kilometers on special market-days in order to buy and sell various commodities.

Today, however, markets such as the world sugar market, the gold market and the cotton market do not need to have any fixed geographical location. Such a market is simply a set of conditions permitting buyers and sellers to work together.

In a free market, competition takes place among sellers of the same commodity, and among those who wish to buy that commodity. Such competition influences the prices prevailing in the market. Prices inevitably fluctuate, and such fluctuations are also affected by current supply and demand.

Whenever people who are willing to sell a commodity contact people who are willing to buy it, a market for that commodity is created. Buyers and sellers may meet in person, or they may communicate in some other way; by telephone or through their agents. In a perfect market, communications are easy, buyers and sellers are numerous and competition is completely free. In a perfect market there can be only one price for any given commodity; the lowest price which sellers accept and the highest which consumers will pay. There are, however, no really perfect markets, and each commodity market is subject to special conditions. It can be said, however, that the price ruling in a market indicates the point where supply and demand meet.