Question

(1) explain why most of todays nations have muxed economies

(2) explain the various changes in rate of price in an economy

(3) define unemployment rate. identify and describe the four types of unemployment in an economy

(4) explain the fundamental rights of capitalism

Answer 1

1. A mixed economy is the combination of capitalism and socialism. Most of the economies are mixed economies due to there certain advantages and flexibility. These are -

Private property ownership - In mixed economy businesses and individuals are allowed right to own and use private property.

Private and public sector - The mixed economy is a function of Private and public sector, where private sector works for profit motive and public sector aims for profit as well as promotion of social welfare.

Regulation – In mixed economy, there is regulation imposed by the government for the stability and well-being of the economy.

Distribution of Income and wealth - The government with its fiscal policies plays a role in the market to reduce unequal distribution of wealth and income.

Efficiency - The competition that takes place between market participants (private and public) lead to efficient allocation of capital for the most productive uses.

Rights of Individuals - To promote healthy competition and fair behaviour in the market, the government protects the individuals and association rights. Thus no one interests are harmed and exploited.

2.Various ways to measure prive level or prices in the economy are

a.CPI - A Consumer Price Index measures changes in the price level of a basket of consumer goods and services purchased by households

b.Deflator Index - Deflator is a value that allows data to be measured over time in terms of base period, so as to distinguish between changes in the prices from the base year. GDP deflator is used to measure the rise in the price level in the economy.

c. Producer Price Index - A producer price index is a price index that measures the average changes in prices received by producers or manufactures for their production

3. An Unemployment refers to the situation when people do not have a work and actively looking for job but are not able to find job. To measure the unemployment rate, we can just divide unemployed people by the number of people in labour force.

4 types of Unemployment are -

1. Structural unemployment - This type of unemployment occurs when there is mismatch of workers skills and skills needed by employers, leading to structural unemployment.

2. Voluntary unemployment - when people wanted to remain on benefits rather than working, it is said to be voluntary unemployment. Individuals may stay unemployed rather to work at prevailing low wage rate.

3. Seasonal unemployment - People may be hired during special seasons than other months. It happens when there is huge demand for labour during certain season and after work is finished they become unemployed.

4. Frictional Unemployment - when people leave their old jobs but haven't yet found new ones or currently looking for jobs, are currently counted as unemployed

4. Fundamental rights of Capitalism are -

a. Right to private property - This Right means people can freely buy and sell property amongst themselves for consumption or investment purpose.

b. Right to own business and keep its profits - The right to own a business and its profits enables a free-market economy to develop and reap reward of risk.

c. Right to freedom of choice - freedom of choice means people can choose what they do want to do in there life and decision making.

d.Right to Freedom of competition - It allows businesses to compete with each other by offering new products and services at competitive prices.