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In a market economy (free-market economy), production, distribution, and exchange are run by private individual firms trying to make profit out of it.

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Introduction

In a market economy (free-market economy), production, distribution, and exchange are run by private individual firms trying to make profit out of it. The prices of goods and products are altered by supply and demand. Supply and demand works by the sellers determine the supply. The buyers/consumer determines the demand. In a free competitive market, the price of the product is moved up or down until the amount supplied equals the amount demanded. An example is, if more consumers demand for a certain product, the firms producing the product will increase the price in order to make more profit from it. If the demand for a certain product is decreased, the price would also decrease so that it would still attract customers. In the market economy, the government does little help but provides the country with public goods such as defense, police, street lights, roads, clean environment etc. ...read more.

Middle

In the command economy, the technology would not advance very fast because every gets the same basic essentials meaning no one would work as hard as they could. On the other hand, advantages could still be found in a planned economy for example there would be no unemployment because people control the economy unlike the free-market; Firms in a free-market tries to make as much profit as possible so that jobs would be cut down and replaced by machines of a more advanced technology and salary for workers would not be needed. A mixed economy is a mix of the market economy and the command economy. Resources are mostly owned by private companies in which they manage the production, distribution and exchange of goods and services. In other words, these firms will determine the quantities of goods and services which are produced, and to whom they are distributed to. ...read more.

Conclusion

The government does not estimate the needs and wants of people because they are produced by firms and the prices of goods/services work like the market economy by supply and demand. On conclusion, the mixed economy achieves a more constant economic growth than other economies. A Mixed economy does have disadvantages for example high inflation, high unemployment and low economic growth. High inflation is caused by rise in prices because there is more demand for it. A High unemployment might sometimes be caused because it may not be profitable to employ people. Also, the government collects taxes from people in a mixed economy. The tax is used to pay for public goods and services such as highways, education, health care and clean environment which no firms would be willing to produce because buyers would not be able to afford it. High taxes may also discourage people from working hard when some of the money they earn are taken away by the government. Francesco Chan 10J ...read more.

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