Before we explain what a mixed economy is, lets clarify what an economy even is!
An economy is a system which is designed to solve the problem of scarcity and ensure the efficient allocation, production, and distribution of resources in order to satisfy as many wants and needs as possible. To put that in simpler terms, those managing the economy, with a finite amount of resources, must decide what to produce, how to produce, and for whom to produce.
A mixed economy is a system which utilises both the public and private sector in order to achieve its economic goals.
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Key terms:
Public sector – organisations which are owned and managed by the government.
Private sector – organisations which are privately owned by individuals or groups of individuals.
Public good – goods and services which are provided by the government as they would remain underprovided if only taken care of by the private sector (e.g. education, healthcare, streetlights etc)