Mixed Economy Explained

What is a mixed economy?

A mixed economy is an economic system in which economic activity is directed by a mixture of private firms and the government.

In a mixed economy, some parts of the economy – known as the private sector – are left to private firms and individuals, whereas other parts, such as education and the military, are controlled by the government. The activity controlled by the government is known as the public sector.

Mixed economies are the most common form of economic system used around the world, with most developed countries dividing economic activity between the private and public sectors.

Key terms

Economy – A system that provides goods and services.

Economic system – This is the way the government of a country organises the production and consumption of goods and services in the economy.

Private sector – This is the area of the economy that is controlled by private individuals and organisations.

Public sector – This is the area of economic activity which is directly controlled by the state. E.g. the defence and legal system.