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Price Mechanism In A Mixed Economy

Price Mechanism in a Mixed Economy
A mixed economy gives a solution of what to produce in what volume it has to be produced. First the market mechanism helps the private sector to make decisions on what commodities to produce and the amount of production. Next, the central plan of power has to decide the nature of goods and services to be produced in what volume where the public sector plays a monopoly. Prices are decided and fixed by the central plan of power with regards to the profit price policy. The problem of how and whom to manufacture is decided by the price mechanism and partly by the state for the first case and central for the next case.

Consumer's Sovereignty

In the competition prevailing market the customer is at his discretion of what could bring in welfare of him while selecting a product to purchase and that of his preference in the choice. In a capitalist economy, the consumer has freedom of choice and hence termed as sovereign, king or queen. The consumer is at liberty to buy the product of his choice in any amount of volume. Every producer tries to produce goods considering the preferences of the customers. This arises to freedom of productivity. The consumers reveal his taste and preferences to the producers through price mechanism. The insistent of desire of for definite products means the consumers are prepared to pay a huge amount of money. A person who wants to begin an industry will be encouraged by the consumer's preferences, for that specific commodity. Thus the consumer is the sovereign. He decides the price and the manufacturers' produces that merchandise which he prefers more. The more the producers produce the more the profit earned.

Limitations of Consumer's sovereignty
  • Unequal income Distribution - Consumer's independence is restricted by imbalanced income allocation in a capitalist society. Poor consumers have limited choice of products.

  • Availability of Goods - Choices are constrained to the goods that are produced and dispersed in the market. The accessibility of goods depends on the availability of resources.

  • Combined Choice - The production is based on the choices and references of not a single customer but as a whole. Hence the making is made based on the tastes of majority of the customers. Thus autonomy of customers is not a actuality.

  • Consumer not rational - The consumer is not a sensible buyer. He is habitually unaware about the value and eminence of the products obtainable in the market and cannot make a correct choice.

  • Society's Customs - The customer's dominion is limited by the common customs of the society in which he lives. He has to follow definite principles and customs of his society which limit his freedom of choice.

  • Fashions - The customer's independence is also unfavourably pretentious by the trends in vogue. He would not like to be mocked by his friends and relatives by wearing the dress of his choice.

  • Standardised Goods - There is no place for consumer's liberty in a capitalist economy where standardised goods are produced in mass. The consumer has no alternative of his own but to buy them in whatever form, amount and superiority.

  • Advertisement and Propaganda - These are in the form of salesmanship, free sampling, complimentary service, door-to-door campaigning newspaper ads etc. The consumer is prejudiced by them and is unable to make choices of goods according to his inclination.

  • Monopoly - The subsistence of monopoly, combines and associates stand in a way of consumer's control. The consumer has to procure the goods produced by the monopolistic at the prices preset by him. There is no other choice for the consumer except to buy the monopolist's goods if he wants to consume them.

  • Government Restriction - The government also controls and standardize the utilization of certain stuff which confines the consumer's sovereignty. The use of intoxicants like wine, opium etc. and injurious drugs is synchronized and even forbidden by the rule. In auxiliary to the control, law and public distribution of indispensable produces like kerosene, rice, sugar etc. are also big obstacles in consumer's dominion. Such limits bound the consumer's choice of commodities.

  • Taxation - The levying of income tax and product taxes badly influence for consumer's sovereignty. Both are likely to lessen the not reusable income of the consumer with the consequence that his preference of goods is limited.

We may conclude the consumer's sovereignty in contemporary times is a fable and not an authenticity. The consumer is not a sovereign or emperor but a slave in the hands of manufacturers the state and of his behaviour, traditions and surroundings. He does not posses any self-determination of choice.

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