Compare and Contrast the Terms Scarcity and Shortage - Research Paper Example

The shortage may occur due to many factors such as hoarding, black marketing, price discrimination etc. For example, sometimes there is a shortage of daily goods such as potatoes, onions etc as the supply of these goods in the market falls short of their demand.Mixed economy refers to an economic system that has both state-owned and private enterprises. It is a combination of socialism and capitalism. Mixed economy allows people a degree of economic freedom and they can buy, sell or make an investment.

But the government has control over certain activities of production and distribution.A mixed economy has many advantages. In a mixed economy, people have the freedom to make their own economic decisions. Private industries compete with state-owned enterprises and competition makes them more responsible. It leads to more economic development. Government plays an active role in the economy. There is government regulation in the economy and social and national objectives are taken care of by the government.

People pay taxes and in return get better infrastructure, roads and other social welfare programs. The government provides health care services to the general public, support unemployed people through various social welfare programs.In the free market economy, there is no government intervention in the economic matters of the country. The free market economy is self-regulated and the government does not regulate any economic activity. The free market economy is similar to the theory of laissez-faire where there is no government control over the economic activities of firms.

Both buyers and sellers are motivated by self-interest.Due to the absence of any government intervention in the economic activities of firms, the market develops into monopolies and oligopolies. The disparity between rich and poor tend to increase as the government does not regulate the market.