Market Economics System:
General Overview and Ideologies
Economic system is a system for producing, distributing and consuming goods and services. There are several economic systems practiced by different countries. One of these is market economic system. Market economic system is known as capitalism, laissez faire economy or free market economy. Market economic system is an economic system that the economic decisions and the price of goods and services are determined by the country’s demand and supply. Producers are compete with each other without any restriction that made by government. The major role of government in this economic system is tries to make sure the competitions are healthy in the market. The countries that are using this economic system are America, Canada, Australia, Switzerland, Argentina and South Africa. Different country may have different economic system due to the variant on political base and development of the country. For example, Saudi Arabia is the country that practicing Islamic economic system mostly because of their religion, culture and socialism. Contents
Analysis (Advantages and disadvantages)
My study is focus on the market economic system. First, let us talk about the government role of this economic system. Government roles in this economic system is to provide public goods such as road lamp, public toilet and etc. Government also tries to make sure there is some competitions among producers and to maintain the health of the competition. Consumer roles in market economy is like the king due to all the outputs of the economy are depend on the consumer’s consumption. Besides, consumers also face scarcity when they got not enough money to buy goods and services. Therefore, they have to forgone something by make choice on buying goods and services, they will make choice on buying necessary goods or services instead of luxury goods. The things that consumers had forgone is opportunity cost. Producer’s role in free market economy is to produce the product that will maximize their output and profit without any restriction of government. They are also compete with each other in the industry. “What to produce”, “how to produce” and “for whom to produce” are the three main economic questions. The question of what to produce in market economy are depends on the market demand and supply. Producers in market economy determine what products to produce by consumer’s preferences. For instance, consumer like big screen smartphones such as Samsung galaxy note. Samsung electronics Inc. will produce more of the large screen smartphone in order to increase their revenue. Producers’ main objective is to maximize their profit. Next, the question is “how to produce it”. In a capitalism market, producers determine how to produce the product by using most appropriate ways such as advance technology and knowledgeable employees to improve their productivity. Some of the companies will give opportunity for their employees to pursue higher education in their particular area related to their work. Therefore the employees are more productive and thus the productivity of the production would be increased. Once productivity increased, their cost of production will decrease eventually will lead to higher profit. The last economic question is for whom to produce it. In a free market, producers can determine that their product market segmentation without the restriction of government. Producers produce luxury products for wealth people and inferior goods for poor people. For instance, Louis Vuitton Malletier (LV), a fashion house company, their product such as LV bags, wallets market segmentation is mainly aim to wealth people. The ownership of resource in this economic system is owned and operated privately. In this system, every single person can own any resources and properties such as land, shop and building privately. They also freedom to allocate the resources in doing economic activities....
Please join StudyMode to read the full document