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