What is a modified market economy? What factors have been responsible for the emergence of this kind of economic system? How do governments influence economic decision making in such systems? Use Australian examples to illustrate your answer.
A modified market economy is a market economy in which there are varying amounts of intervention and property ownership by the government. The Australian economy would be classed as a modified market, as we have a certain degree of government intervention, and this is something we should feel lucky for in our country, because due to this we are able to experience the free, fair lifestyle which we enjoy.
The emergence of this kind of economy is mainly due to weaknesses in the market economy which, with out regulation, becomes an economy mainly concentrated on the wealthy people. The basic reason for the modified market economy is that the free market does not produce an efficient allocation of resources, and that the free market does not distribute output in a socially desirable way. For example in a modified market, the government regulate the flow a income a bit so that not only the rich make money. In a market economy the rich get richer and the poor get poorer as there is no regulation in terms of income distribution. The intervention by the government, in forms such as social security nets, which is present in a modified market, makes society more evenly spread rather than everyone being one of two things, that is, very rich, or very poor.
In such economies as these, the government influence economic decision making much to our advantage in terms of them providing many of the resources needed to satisfy collective wants, making restrictions upon what can and can not be done, in the interests of our health, the environment, impacts upon society etc. Through this they regulate much of the possible ?bad’ economic decisions that could be made.
The Australian government does place some limitations on freedom of enterprise, but generally encourages private business activity as it is an advantage to our whole economic growth in terms of employment etc.
The Australian government also encourages the idea of fair competition. To keep the consumer choice less restrictive the government might not allow certain take overs that may limit the number of choices available to the consumer. Competitive prices that come from businesses are also good for the economy in general, for example if an Australian owned company, such as Uncle Toby’s, can provide the same food as an American owned company at a competitive price, then consumers will tend to buy from the Australian company which keeps more our money in our country.
Basically, the government intervention in economies such as ours, is all done to benefit our economy as a whole, to help even the distribution of income, to provide resource to help satisfy our unending collective wants. It is all done in an effort to make our country’s economy as efficient and all round satisfying, as possible. To make our country a prosperous and enjoyable place to live.
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Topic: The Modified Market Economy
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