Market Economy

In a market economy, the questions of What, How and for Whom to produce are made by individuals and firms acting in their own interests. In economic term a market is an arrangement that allows buyers and sellers to come together to conduct transactions.

Since consumers like products with low prices and high quality, producers in a market economy will try to supply such products. Those who make the best products for the lowest prices will make profits and stay in business. Other producers will either go out of business or switch to different products consumer can buy.

A market economy has several major advantages that traditional economy doesn't have. First, a market economy is flexible and can adjust to change over time.

When gas prices in the United States began to level off in 1985 and then decline in 1986, the trend slowly began to reverse.

The second major advantage of the market economy is the freedom that exists for everyone involved. Producers are free to make whatever they think will sell. They are also free to produce their products in the most efficient manner. Consumers on the other hand are free to spend their money or buy whatever goods and services they wish to have.

The third advantage of the market economy is the lack of significant government intervention. Except for national defence, the government tries to stay out of the way. As long as there is competition among producers, the market economy generally takes care of itself.

The final advantage of the market economy is the incredible variety of goods and services available to consumers. In fact, almost any product can and will be produced so long as there is a buyer for it.