Economic system in market economy

2. Three main economic systems

• In this world there are three main types of economic systems. Governments and their leaders claim to have their own peculiar systems, but they are all basically mixed economies. Economic systems can be basically classed into three categories.

Market economy: here prices are determined by levels of supply and demand, instead of central and or local government. Market forces determine what is produced, how much is produced, how it is distributed, plus the prices of goods and services.

• Market economy: here prices are determined by levels of supply and demand, instead of central and or local government. Market forces determine what is produced, how much is produced, how it is distributed, plus the prices of goods and services.
• All decisions regarding investment and salaries are also driven by market forces in a market economy.
• In a market economy, the government plays a minor role and only lays down the rules so that businesses can thrive. An outdated word for this type of economy is Capitalism.

The Market Economic System

• A market economic system is based on market freedom. In other words, market forces control the economy. What are market forces? Consumers deciding whether to buy a good at a certain price, to wait before buying it or to never buy is a market force. Businesses pricing products to create maximum profit, taking into account consumer demand, is another market force.

Therefore, a pure market economic system will rely fully on consumer and business behavior for economic planning. Businesses will produce more when consumers buy more, consumers will save up when prices get too high.

• Therefore, a pure market economic system will rely fully on consumer and business behavior for economic planning. Businesses will produce more when consumers buy more, consumers will save up when prices get too high.

• However, there are no examples of pure market economies as almost every economy involves some degree of regulation to distribute economic resources. Regulation also prevents consumers and business from suffering from abusive behavior by their peers, and from market-distorting tactics taking hold. Yet many economic systems are so lightly regulated that they are effectively market economies.
• In theory, a market economy allows for a lot of economic growth because markets are most efficient at allocating economic resources. It’s easy to argue that the highest economic growth is indeed under a market system where government influence is minimal.