The correct option is 1 and 3 only.
Explanation
A mixed economy is an economic system that synthesizes elements of both capitalism (market economy) and socialism (command economy). It is characterized by the co-existence of the private sector and the public sector, where resource allocation is determined by both market forces and state intervention.
Statement-wise Analysis:
- Statement 1 is Correct: In a mixed economy, both the government (public sector) and the market (private sector) play significant roles. The market operates based on the price mechanism (demand and supply), while the government intervenes to provide public goods, regulate markets, and ensure social welfare.
- Statement 2 is Incorrect: An economy where all economic decisions regarding production, distribution, and pricing are taken solely by the market is termed a Capitalist or Free-Market Economy. In a mixed economy, the government retains control over strategic sectors and regulatory oversight.
- Statement 3 is Correct: India is a prominent example of a mixed economy. Upon independence, India adopted a framework where the state controlled commanding heights of the economy (strategic industries) while allowing private enterprise in other sectors. Despite economic liberalization in 1991, the Indian economy continues to function with both public and private participation.
Key Takeaway:
The defining feature of a Mixed Economy is the simultaneous operation of the public sector and the private sector, aiming to balance economic efficiency with social justice.