Market Economy and its advantages/disadvantages



Economic systems:

Market economy

  • Private ownership
  • Resources allocated towards making what consumers like
  • Firm operate to make profit
  • If consumers want to buy a product then the price will rise
  • Restricted government role, limited to defence, police, justice systems
  • E.g. Taiwan,USA
  • Private property, profit motive, price system

Advantages:

  • Profit makes firm more effective
  • Competition keeps prices low leads to new profit
  • Work is encouraged as taxes are low
  • Choices for consumers

Disadvantages

  • No state support for the elderly, pollution
  • Income differences
  • Monopolies are created: reducing competition






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