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Consider the following pairs:
1. Capitalist Economy - Goods are distributed on the basis of the need of the people.
2. Socialist Economy - The government decides how goods are to be produced and how they should be distributed.
3. Mixed Economy - Goods are produced by both public and private entities.
Which of the above pairs is/are incorrectly matched?
  • a)
    1 only
  • b)
    2 only
  • c)
    2 and 3 only
  • d)
    1 and 2 only
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Consider the following pairs:1. Capitalist Economy - Goods are distrib...
In a capitalist economy, the distribution of goods is determined by competition in goods and markets. So option a) is incorrectly matched. 
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Community Answer
Consider the following pairs:1. Capitalist Economy - Goods are distrib...
  • Pair 1 is incorrectly matched: In a capitalist society, the goods produced are distributed among people not on the basis of the need of people but on the basis of purchasing power.
Supplementary notes:
Capitalist Economy
  • In a capitalist society, the goods produced are distributed among people not on the basis of what people need but on the basis of Purchasing Power— the ability to buy goods and services. Hence, money is more important in this economy.
  • Example: Low-cost housing for the poor is much needed but will not count as demand in the market sense because the poor do not have the purchasing power to back the demand. 
  • As a result, this commodity will not be produced and supplied as per market forces.
  • This society did not appeal to Jawaharlal Nehru, our first Prime Minister, for it meant that the great majority of people of the country would be left behind without the chance to improve their quality of life.
Socialist Economy
  • In a socialist society, the government decides what goods are to be produced in accordance with the needs of society. It is assumed that the government knows what is good for the people of the country and so the desires of individual consumers are not given much importance.
  • The government decides how goods are to be produced and how they should be distributed. In principle, distribution under socialism is supposed to be based on what people need and not on what they can afford to purchase.
  • Unlike capitalism, for example, a socialist nation provides free health care to all its citizens. Strictly, a socialist society has no private property since everything is owned by the state. Mixed Economy
  • In a mixed economy, the market will provide whatever goods and services it can produce well, and the government will provide essential goods and services which the market fails to do.
  • There were many states of the world that opted for a mixed economy in the post-Second World War period after coming out of the colonial rule, such as India, Malaysia, Indonesia, etc., to name a few.
  • After Independence, India opted for a mixed economy when the state-market dilemma was at its peak globally.
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Consider the following pairs:1. Capitalist Economy - Goods are distributed on the basis of the need of the people.2. Socialist Economy - The government decides how goods are to be produced and how they should be distributed.3. Mixed Economy - Goods are produced by both public and private entities.Which of the above pairs is/are incorrectly matched?a)1 onlyb)2 onlyc)2 and 3 onlyd)1 and 2 onlyCorrect answer is option 'A'. Can you explain this answer?
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