Characteristics of a Market Economy
what is the driving force of a market economy
motive of self-interest
Disadvantages of a market economy
only those people with resources may take part in a market economy; often due to an income gap; people with the most resources (money) keep getting richer, while people with fewer resources get poorer.
competition
limits abuse of economic power by one business or individual against another; buyers and sellers are free to enter or leave any market; buyers and sellers are acting independently in the marketplace
free enterprise
private entrepreneurs are free to get and use resources and use them to produce goods and services; they are free to sell these goods and services in markets of their choice.
True free market economy
an economy in which all resources are owned by individuals; decisions about allocation of resources are made by individuals without govt intervention; decisions are influenced by the pressures of competition, supply, and demand
Advantages of a market economy
competition ensures greater quality and lower prices for consumers; individuals are encouraged to take business risks to further their own economic interests, which benefit the economy as a whole
Freedom of choice
consumers are free to buy the goods and services that best fill their wants and needs
Private ownership
permits people to obtain and use resources as they choose, often combined with the freedom to negotiate legally binding contracts
Most important characteristics of a market economy
the role of limited govt; most economic decisions are made by buyers and sellers, not govt
System of markets and prices
the structure of a market economy; brings buyers and sellers together; prices are the guideposts on which buyers and sellers make and revise their free choices in furthering their self-interests
Command economy
type of economic system where a government controls the market
Market economy
type of economic system where supply and demand regulate the economy, rather than government intervention; almost everything is owned by individuals and private businesses--not by the govt
