April 19, 2019Market Systems
The market system is a system in which the economic decision is decentralized with little of central planning other government involvement. Supply and demand are the aspects which controls the economy. The resources are owned by institutions and by private individuals. Individual performs upon their own self-interest. Within the market system, the market and prices are managed and aimed towards the economic activity.
Market system economy is a topic, in my opinion, an important factor in economy. This topic involves with market and price which is an importance role played in our daily lives. The prices of the general goods or products that are bought are based upon us as consumers. Gasoline and oil is a great example for the economy right now. The supply of gasoline is high therefore the demand is low, which results prices to be fairly low. However, in 2005, when Hurricane Katrina collided with the oil production. The supply was very low, and the demand became extremely high. This led to the gasoline prices to be high. There are more factors to my opinion why market system is important to the economy. There are several aspects of the market system that indicate how the market system functions.
The market and prices are being of the characteristic for the market system. These two factors are what assembles the market system. A market is a convention where the buyer and seller come along together. Supply and demand reflect upon the prices. When the supply is low, then the demand becomes higher. This results the prices to become higher. Although consumers are more attracted to goods or services when prices are low. This occurs when the supply is high, then the demand becomes low resulting in low prices.
Private property being another characteristic of the market system. Private property indicates the right of private individuals and firms, and not the government to own most of the property for example as capital and land. Private businesses are not owned by the government but mostly by individuals. Private ownership has the freedom to negotiate lawfully obligated into contracts, allows individuals to acquire and use the resources as they desire. This result with their assets to give them right to profit from ownership. With private property rights to further towards investing, maintenance of the property, improvement, give-and-take of assets along with economically growth.
Another characteristic of market system is the competition. Competition is something that can be good or bad depending on other factors. Competition forces pressure on the prices to mostly kept it reduced. However, when demand increases for a product, then the prices rise as well due to law of demand. This provides a chance to improve one’s profit. When the competition occurs between businesses, one wants to sell the services and goods at lower prices along with earning profit as well. Otherwise, the business would go into a loss, if trying to sell at lower price resulting in no profit. Conversely, prices are increased when the supply is low. The prices in the market demand on supply and demand.
Freedom of enterprise is another characteristic and plays a huge part in the market economy. Free enterprise economy is a limited government, which means that the buyer and seller make the economic decisions rather than the government. This leads to owners to have freedom of choice which indicates towards property, consumers to spend the income their own way, and workers to choose jobs of their desire. The owners are also given the freedom to produce of their choice, sell in the market, and purchase the goods and services and use them. However, there are limitations to one would have is the amount of capital and the price to which they desire. Since the price would be according to the market economy, and not the owners.
Self-interest is a characteristic that is driven by motive in the market economy. Individuals have a drive to achieve the utmost benefits from their budget. Individuals thrive for the lowest loss otherwise extreme profit. Invisible hand in this instance is the vital force of self-interest of the market system.
The market system does have its advantages and disadvantages. Some of the advantages of market system economy. One of them involving with supply and demand, which mostly confirms the goods and services that are produced to be needed. With this concept, where consumers will pay whatever the amount is for the products or services they want. This would increase the profit for businesses. Another advantage is innovation, with products being creative and unique it will attract consumers more towards the product.
Along with advantages always comes the disadvantages. Competition is a factor that can fall into both categories. Second, the society looks up towards the standards of successful leaders. Therefore, private jets may be produced even though there are homeless people.
These characteristics construct the market system economy. One of the benefits stating the less involvement in the central planning by the government. In my opinion, market system economy is more beneficial compare to command system economy. Command system is controlled by the centralized government. However, there is lack of freedom in the command system, where the government keeps the profit.
There are several countries that have the market system economy. Though the top five countries are Hong Kong, Singapore, Australia, New Zealand, and Switzerland. Hong Kong has been part of the market economy for the past eighteen years. Hong Kong has succeeded in being the highest rank in 2012 of being at 89.9 score out of 100. Right after Hong Kong, Singapore is next in line being second. Singapore is known to have a tough property rights. Australia also has strong property rights along with high levels of business opportunities, low government involvement and labor ; financial liberty. New Zealand and Switzerland also follow the standard procedure that falls into being the market system economy.
United States may not be ranked in the top five, but it is part of the market system economy. It does consist protections and regulations. United States is not fully market system based economy. United States developed into a mixed economy since it enacts monitoring the regulations of business and corporations.
In my opinion, I prefer market system economy, rather than the command system economy. Since the profits and freedom is beyond the command system economy. Though it does have its advantages and disadvantages. However, overall it seems to keep the market economy stable and accommodating towards the consumers and the individuals who provide to the consumers.