Features of market economy Features of market economy
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Hamro Library

Features of market economy

Features of the market economy

Features of the market economy:

1. Supply and Demand:
The concept of supply and demand plays a role in determining your pricing structure. Generally, the larger the available supply of goods or services in relation to their demand, the lower the price you can charge. Conversely, if demand is high but the supply is low, the price charged goes higher.

2. Competition:

A market economy encourages competition. Regardless of the type of small business you operate, you likely face competition in some form. The more competition you encounter, the more you have to monitor your pricing in relation to your competitors.

3. Profit
Business owners in a market economy are usually motivated by how much money they make. One measuring stick of the success of a business enterprise is “how much revenue it generates in relation to its expenses”. Thus, an overall goal of businesses in a market economy is to attract customers who will buy their products at a price that earns them the highest profits.

4. Less Government Intervention
In a market economy, the government does not dictate economic policy as it does in a planned or social economic structure. In theory, the government’s role is to help maintain market stability. This means that components such as prices are set by market conditions with minimal government intervention.

5. Perfect competition:
It can also be said that a market economy is a type of economy where competition between businesses informs the cost of goods and services. Businesses fix prices of goods and services based on their need to make profits and the desire to outperform the competition.

6. Consumer freedom:
In a free market, consumers have the right to choose which business to engage with. They are not restricted to purchasing from a specific firm. The availability of different choices makes it possible for this to happen.

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