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A mixed economic system is one that combines aspects of both a command economy and a free market economy. In a mixed economy, the market and the government both have a significant impact on how resources are allocated and distributed.
The market is the main mechanism for setting prices, allocating resources, and distributing products and services in a free market economy. In a free market economy, the government has a very small role and often only gets involved to enforce contracts and property rights or to regulate select industries to maintain competition.
A command economy, on the other hand, is one in which the government controls the means of production and decides everything that affects the economy, including what products and services will be produced, how much they will cost, and who will use them. In a command economy, private property and markets are either completely prohibited or severely constrained.
Government and the market both have significant economic contributions to make in a mixed economic system. The government has the right to enter the market in order to deliver public goods, control certain industries, and address market imperfections including externalities and information asymmetry. At the same time, the market is permitted to function freely in the majority of sectors, setting prices and distributing resources in accordance with supply and demand.
The majority of contemporary economies are mixed economies with variable levels of governmental interference and market independence. Across nations and even within the same nation over time, the precise balance between the market and the government might fluctuate significantly.
