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Market Economies- characteristics and examples.

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Introduction

Market Economy Market Economy- is an economy in which the decision of individuals, firms and the pricing of goods and services are guided solely by aggregate interaction of a country's citizen. In contrast within this system all goods and service a part from pure public goods are provided via the market mechanism. The consumer decided what is to be produced this is done according to consumer sovereignty, their spending/purchasing votes tell producers which goods and service are wanted at a given price and which are not. The mode of production (how goods and service are provided) will be determined via market mechanism. This is simple saying the producers will be anxious to attain the least cost means of production available to them. The key point in production of goods and services is that the buyers and sellers interact in the market on prices and its system. For example if milk is has an short supply but has a high demand towards then adversely it will have a high price attached to it. ...read more.

Middle

Price of a commodity generally shoots up when its demand exceeds supply and when the reverse occurs, it is generally associated with price cuts of the good in question. In a way, free market gives the absolute power to prices to determine the allocation and distribution of goods and services. These prices, in turn, are fixed by the forces of supply and demand of a commodity. In cases of demand falling short of the supply of a commodity, the price will fall as opposed to a price rise when the supply is inadequate to meet the growing demand of a good or service. Advantages of Market Economy > Competition between different firms leads to increased efficiency, as firms do whatever is necessary including laying off workers to lower their costs- due to which the government does involve in this economy firms utilized the resources in the best way to produce output in order to obtain income. > There is more innovation as firms look for new products to sell and cheaper ways to do their work. ...read more.

Conclusion

be made would not make profits for those who own the machines and raw materials and in a market economy profits are what matters. > Reduced social benefits and welfare-since such benefits are financed at least in part by taxes, extended benefits generally means reduced profits for the rich furthermore, any social safety net makes workers less fearful of losing their jobs and consequently less willing to do anything to keep them. > No government control over pollution-due to how the does not involve in this economy no laws or policies are being made on behalf of firms on the environment. > Monopolies might be created as business owners see the gains to be made from reducing competition. Movement away from Market Economy Command Economy to Market Economy Georgia- Georgia broke away from the USSR in 1991. Since that time it has experienced a number of political and economic difficulties as it has come to terms with its independence. Due the decision making by bureaucrats and progress it caused the country to switch to market economy. ?? ?? ?? ?? 1 ...read more.

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Response to the question

This essay engages well with the task, looking at an overview of a market economy, how they function and the disadvantages and advantages. Although this is not an essay question, this is a good way of revising shown here. There ...

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Response to the question

This essay engages well with the task, looking at an overview of a market economy, how they function and the disadvantages and advantages. Although this is not an essay question, this is a good way of revising shown here. There is an awareness of market forces determining price and quantity on a microeconomic scale, but there is little discussion about how a government functions in a market economy. Yes, a lack of government support is mentioned in the disadvantages, but I would've wanted a more in-depth discussion of how some economists argue that free markets fail, looking at Keynesian ideas etc to solidify this essay in the top band.

Level of analysis

The analysis here is good, but sometimes concepts aren't phrased overly clearly. For example "pricing of goods and services are guided solely by aggregate interaction of a country’s citizen" doesn't fully explain the demand and supply mechanism. Here, I would simply give a clear diagram showing how changes in demand and supply will alter the equilibrium price and quantity. It was good to see the comment that price acts as a signal of market value, and this is a key advantage of free market economies as it allows for more efficient production. The advantages are summarised well, but I feel some of the mechanisms need to be explained rather than asserted to ensure the examiner knows you understand the concepts. For example stating "There is more innovation as firms look for new products to sell and cheaper ways to do their work" is correct, but there's no explanation of how a market economy facilitates this. Similarly stating "Monopolies might be created as business owners see the gains to be made from reducing competition" is correct, but I would focus on how a government can intervene and prevent monopolies in a mixed economy.

Quality of writing

The task here isn't an argument, so its difficult to comment on the structure. However, it has a natural set of subheadings progressing from basic definitions and knowledge to analysis and evaluation. If this essay wanted to go further, it could discuss the extent to which a free market economy is favourable based upon the advantages and disadvantages discussed. Spelling, punctuation and grammar are fine on the most part, but I just feel technical terms could be used with more fluency. By this, I mean a more thorough explanation when they are used.


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