2- mavzu: Iqtisodiy bazis tushunchalari Iqtisodiy extiyoj tushunchasi. I

price controls sometimes force prices above or below what they would be in a market economy, short-circuiting the market=s information transmission function. They effectively strip the market price of its meaning for both consumers and suppliers.

Policy Application: Countries that do not Rely on a Market System

The market mechanism is a simple but effective and efficient general means of allocating resources among alternative uses. But market failure can lead the economy to fail to allocate resources efficiently. (examples: pollution and scientific research). When the economy produces too little or too much of something, the government can improve society=s well-being by intervening.

Sometimes the market economy does not always communicate accurately. Some firms may have market power to distort prices in their favor and without adequate information, unscrupulous producers may be able to misrepresent their products to the disadvantage of unwary consumers. Sometimes a painful tradeoff exists between how much an economy can produce efficiently and how that output is distributed. A market economy cannot guarantee provide everyone adequate amounts of food, shelter and health care. That is, not only does the market determine what goods are going to be produced, and in what quantities, but it also determines the distribution of output among members of society. Degree of equity arguments can generate some sharp disagreements, as what is “fair” for one person may seem highly “unfair” to someone else.

However, just because the government could improve the situation does not mean that it will. After all, the political process has its own set of problems, such as special interests, shortsightedness, and imperfect information. For example, government may reduce competition through tariffs and quotas, or it may impose inefficient regulations that restrict entry.

1^ Robert L.Sexton “Exploring Economics” Part I Chapter II

2^ Robert L.Sexton “Exploring Economics” Part I Chapter II