Mixed economies, which combine elements of both market and planned economies, face several limitations in balancing efficiency and equity. One major challenge is determining the optimal level of government intervention. Too much intervention can lead to inefficiencies, stifling the benefits of market competition, while too little can lead to significant social and economic inequalities. Mixed economies also grapple with the issue of bureaucratic inefficiencies and potential corruption, which can arise from government involvement in economic activities. Additionally, mixed economies must constantly adjust their policies to respond to changing economic conditions, which can lead to instability and uncertainty. This balancing act is further complicated by political pressures and the diverse interests of various social groups. For example, policies aimed at redistributing wealth or providing social welfare might be economically inefficient but socially desirable. Conversely, policies that promote economic growth and efficiency might exacerbate social inequalities. Thus, mixed economies often find themselves navigating complex trade-offs between competing economic and social objectives.

Different economic systems have varied impacts on consumer choice and innovation. In market economies, consumer choice is typically high, as the system incentivises producers to innovate and diversify their products to meet diverse consumer needs and preferences. The competitive environment drives firms to innovate to maintain or improve their market position. This leads to a wide array of products and services, and rapid technological advancements. In contrast, planned economies often have limited consumer choice due to the centralised control over production. The focus is more on meeting basic needs and achieving equitable distribution rather than catering to individual preferences. Innovation in planned economies is often slower, as the lack of competition and profit motive reduces the incentive for firms to innovate. Mixed economies aim to strike a balance, promoting innovation and consumer choice through market mechanisms while ensuring equitable access to essential services and goods through government intervention. However, the extent to which they successfully balance these aspects varies, and sometimes consumer choice and innovation might still be limited compared to pure market economies.

In a market economy, prices are central to the process of resource allocation. They are determined by the forces of supply and demand and serve as vital signals to both consumers and producers. For consumers, prices convey information about the cost of goods and services, influencing their buying decisions. High prices may signal scarcity or high demand, leading consumers to either limit their consumption or seek alternatives. For producers, prices indicate the potential profitability of producing certain goods or services. Rising prices can signal increased demand or scarcity, prompting producers to allocate more resources towards the production of those goods or services to maximise profits. In essence, prices in a market economy act as a mechanism to balance supply and demand, ensuring that resources are allocated to where they are most valued. This mechanism helps in the efficient distribution of resources without the need for centralised planning, as the price adjustments naturally guide resources towards their most efficient uses.

In market economies, public goods and externalities present significant challenges. Public goods, like national defense and public parks, are non-excludable and non-rivalrous, meaning their consumption by one individual does not reduce availability to others, and individuals cannot be effectively excluded from their use. In such cases, the free market may under-provide these goods since there is little profit incentive. Externalities, both positive and negative, occur when a third party is affected by a transaction they are not directly involved in, like pollution (negative externality) or education (positive externality). Market economies often rely on government intervention to address these issues. Governments may provide public goods directly or fund them through taxes. For externalities, they may impose taxes or subsidies to internalise these external costs or benefits. For instance, a carbon tax is imposed to incorporate the external cost of pollution into the price of goods and services that produce greenhouse gases. This intervention aims to correct market failures and ensure that the market economy functions more efficiently and equitably.

Planned economies strive for equity in resource allocation by centralising decision-making processes and prioritising the equitable distribution of resources over market efficiency. In these systems, the government, rather than market forces, determines what goods and services are produced, how they are produced, and who receives them. This central authority plans and allocates resources with the goal of meeting the basic needs of the entire population, rather than allowing the market to distribute resources based on profitability and consumer demand. For instance, planned economies often focus on providing universal access to essential services like healthcare, education, and housing. The government sets production targets and controls prices to ensure affordability and accessibility. While this approach aims to reduce inequalities and ensure a minimum standard of living for all, it often encounters challenges related to inefficiency, lack of consumer choice, and potential shortages or surpluses due to the difficulties in accurately predicting and meeting consumer demand.