full market economy status

Introduction

A market economy refers to an economic system, in which the production of goods and services is driven by forces of demand and supply. In such a system, the flow of commodities is typically facilitated through sellers competing to offer them at a particular price. Under a completely market economy, decisions pertaining to the allocation of resources, production of goods and services, and the distribution of commodities, are answered according to the market forces of demand and supply. Such an economic system is also characterized by very limited government participation, in which government of the day only augments the market forces to ensure equitable living and protecting the economy from potential threats. Thus, governments offer public goods and services, and generally provide very limited direct support to particular companies and industries, aside from the provision of legal frameworks defining ethical trading systems and catalysing competition.

Demand and Supply

The primary factor driving a free market economy is the forces of demand and supply. Demand is an economic term which refers to the quantity of a particular commodity or service that a consumer is willing and able to purchase at a given price, at any given moment in time. On the other hand, supply denotes the amount of a goods or service that a producer is willing and able to provide, at any given time. The demand and supply of goods and services drives both the production and consumption of commodities, as well as the pricing of goods and services. There is a close relationship between the demand and the supply of a particular commodity -as the demand increases the price will lessen, while with the increase in supply the prices will rise.

Market Forces

In a completely market economy, the market forces of demand and supply is the primary driver behind the production and transactions of goods and services. In such an economy, the producers of goods and services freely compete against each other in the market, as there is no government intervention or restrictions. The producers, with the help of market forces, determine the quality, quantity, and the price of the goods and services. The market forces, in turn, ensure that the markets are competitive, efficient and equitable; meaning the goods and services are produced in a cost-effective manner, with its availability broadening the access to its provision.

Government Regulation

In a free-market economy, the governments’ role is hardly involved in the production decisions, pricing, and marketing activities that are carried out by firms. However, the governments of a completely market economy intervene certain aspects of the economy, to solidify the market forces. Governments in such an economy, by providing appropriate regulations, make sure that the market forces are balanced. Also, with the legal framework, governments ensure that economic players engage in ethical trading activities, and ensure no abuse to the power of the market powers.

Conclusion

A completely market economy is an economic system in which resources, goods and services are produced, distributed and transacted, on the basis of the forces of demand and supply. Such an economic system is characterized by a lack of government intervention, and allows producers of goods and services to freely compete against each other. The price of the goods and services is determined by the market forces, which are determined by the respective markets forces of demand and supply. Thus, it is the nature of a perfectly competitive environment in which resources, goods and services are produced, based on the preference and capabilities of the consumers. Although government participation is constrained, governments provide appropriate regulations to protect the economy from potential threats, and to ensure that there is equitable trading and production of goods and services.

A market economy is one where the conditions of production and exchange are determined by the supply and demand of the market forces of buyers and sellers, as opposed to being determined by the government. The concept has several benefits to an economy, the primary of which being its ability to provide the most efficient use of resources.

In a market economy, individuals and businesses are able to make their own decisions and determine prices. This type of economy leads to innovation and entrepreneurship which can result in the development of markets that are able to supply and meet the need of consumers. As opposed to government regulated economics, a market economy is seen as providing a more fair and equal social system.

In a fully functioning market economy, companies are motivated by their own profitability, in order to maximize their profits, and this results in greater economic growth. Companies are able to respond quickly to changes in consumer demand by either increasing or decreasing their production of certain products in order to meet the needs of the consumer. This leads to increases in consumer satisfaction and improved standards of living for people all over the world.

In terms of foreign trade, a market economy allows businesses to increase their capital by selling products and services abroad. This can lead to increasing levels of competition while also reducing overall costs. Furthermore, the competition created by a market economy can keep businesses from over pricing their products and services which can help to keep consumer prices low.

Overall, a market economy provides a number of advantages such as increased economic efficiency, greater consumer satisfaction, and access to foreign markets. With the proper economic institutions and policies in place, a market economy can be the key to creating an efficient, equitable and prosperous economic system.