IGCSE Economics CIE Section 2 – The Allocation Of Resources Practice Test

Mixing private and public sectors describes an economy where both play important roles. In a mixed economy, most production and prices are driven by markets and private firms, but the government steps in to provide public goods and services (like defense, education, healthcare), regulate markets to prevent abuse, and redistribute income to improve fairness. This combination aims to keep efficiency from market forces while addressing what markets alone might miss, such as social welfare or environmental protection. The other systems rely almost entirely on one sector. A market economy centers on private decisions with little government intervention. A command economy is dominated by government planning and state ownership. A traditional economy follows longstanding customs and practices. Therefore, the system that fits the description of both private and public roles is the mixed economy.