• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Assessment of the market economy system

Extracts from this document...


Title: The market system is the best method of resource allocation. Governments should limit themselves to the protection of private property rights. Discuss When people talk about free market economy, we usually associate it with capitalist economy system, which was an unacceptable form from Chinese viewpoint in the old days. However, in the modern world, market economy does play an important role in regulating actions in the trading market and many countries are running under the market economy system as well. In my opinion, market economy is the best method of resource allocation up to now, and it should be put into the dominant and decisive place in the economic system, government intervention mixed at the same time. As economy is concerned with allocating the scarce resources to satisfy human beings' unlimited wants, the central problem is focused on problem of scarcity. So any economy system, whatever command economy or market economy, must be able to allocate resource as efficiently as possible. However, market economy, has an absolute advantage in both productive and allocative efficiency, compared with the former, because people can make rational choices according to the interaction of demand and supply which will have an impact on the price of the goods and services. ...read more.


the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable on man to do the work of many." Resource: Adam Smith the Wealth of Nations Book1 Ch1 pp.15 As we know, nowadays, division of labour occurs in almost all areas of market economy. For example, in schools, different teachers give different lessons, some staff are responsible for the management of the school, some are responsible for the library, some are responsible for the IT Center, some are responsible for the restaurant, etc. we cannot let people be self-sufficient, because it will lead to extremely low efficient, if they could do all the jobs. Additionally, specialization also provides individual an opportunity to specialize in each activity where they have a comparative advantage so that the society as a whole will again get the increased efficiency. This is particularly common in trading. Take China for example, table 1 shows the total units of each type of production produced by the two parts of China over a certain periods of time: Comparative advantage (units of output) ...read more.


p.212) Facing these problems in a free market, government intervention is strongly needed for redistribution of resources, for correction of externalities, for regulations and laws. Taking taxation for example, government imposes a tax on that medical factory to equal the marginal pollution cost, thus it will internalize the externality it created into its cost, which is shown in figure 3. Also it will make the factory an incentive to reduce the pollution as much as possible, because it is the same as to reduce its cost. So the MSC curve shifts downwards to a new level and because of the tax, MC curve shifts upwards to meet MSC' where MC'=MSC'. Hence there will be a change to equal marginal private cost (MC) to marginal social cost (MSC), which results in social efficiency. In conclusion, market economy system has absolute advantages in allocating limited resources. It automatically maximizes both the productive efficiency and allocative efficiency in ways of constantly minimizing the cost by the development of high technologies. In doing so, the world has made unconceivable wealth. At the same time government should also play its role in the market, wherever the market is efficient enough, government should protect private property rights, wherever market is not efficient enough, government should take action of macro-intervention to regulate market system with different methods. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Use game theory to analyze an oligopoly competition of two great rivals, Wal-Mart and ...

    While opening shops without a stop everywhere, Carrefour successfully conjugated with local governments. When Carrefour's largest opponent was following the central government policy-operating centralization in Guangdong, Carrefour had expand massively and stealthily all along China. Carrefour's vice president indicates that: there are three conditions for Carrefour to be successful in China market: localization, support from local government and excellent partners.

  2. Causes of the Great Depression

    In 1928, there was a lot of talk on how to curb the tide of marginal stock purchases without causing a panic on the market. The bottom line was, no one wanted to take the blame if the market crashed because of measures taken to prevent it.

  1. Chinese economy sets for soft landing in 2005.

    Hong Kong posted a HK$40.1-billion budget deficit for the 2003/2004 fiscal year, lower than forecasts thanks to the economic recovery late last year. However, Hess did raise his concerns on one of the most talked-about topics - the Hong Kong government needing to broaden its sources of revenue.

  2. The Quest for Optimal Asset Allocation Strategies in Integrating Europe.

    in institutions across countries affect the transmission of global shocks to asset values. Either way, economic shocks can cause variation in stock returns that is country specific. Home bias in the portfolio holdings of investors. Instead of diversifying across all markets and holding a portfolio that mirrors the world portfolio,

  1. It was suggested by Adam Smith in 1776 that individuals led by self interest, ...

    to encourage school leavers to train in the trades it requires for the future. It may also subsidise businesses that it believes may be experiencing a temporary fluctuation in the market. Inflation Many believe that inflation can be looked at as another market failure, particularly wild fluctuations of the level of inflation.

  2. Split Votes: A Nation Divided on the Marijuana/Drug Legalization Debate

    and educate him or her about the potential risks and benefits associated with marijuana smoking. Rami Zheman started the chain of letters by writing about a friend who lost his financial aid and will not be able to finish school due to a marijuana possession charge.

  1. Chinese car market overview. Citroen case study

    Moreover, smaller cars, not considered as high class cars, are already very popular for younger customers, because of their price and the success of "tuning" on the European and American continents. In 2010, private car holders in China will definitely be the first customers on the market. (BOOTH E,1998) B)

  2. Bellway Plc is a holding company with subsidiaries; its main subsidiary company is Bellway ...

    gap' between the high demand for "houses young people can afford"39 and the supply of them. * Change in stamp duty charge The 2005 Budget has increased the threshold for stamp duty from �60,000 to �120,000.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work