Market Economy

Market Economy

Market economy has come to be accepted as a norm across the world with many developing countries like India and China moving towards a full-market oriented economy.

But why is it better than a command economy?

Market economy also known as free market is the capitalism type of economy, free market makes individuals the one to make the important decisions economically speaking, market economy makes people work harder than all other economies because if you work hard you will get repaid for your extra effort not like command economy in which it doesn’t matter how hard you work you will get paid the same as the person on your side.

Market economy functions primarily depending upon the forces of the market, namely demand and supply. The institution of the market allocates and distributes commodities based on the principle of price determined by the interaction of the forces of the market. Price of a commodity generally shoots up when its demand exceeds supply and when the reverse occurs, it is generally associated with price cuts of the good in question.

So why is market economy better than command economy?

The advantages of a market economy can be summarized as:

• Buyers are free to purchase any commodity which they like and in whatever amounts. The seller of a good or its producer can also produce whichever product they want to and also increase the capacity of any individual commodity depending upon the forces of the market. Producers are free to undertake the risks and rewards associated with increase in production. There is no state intervention in the functioning of the forces of the market. On the other hand Command economies plan for society's needs, which do not necessarily take into account people's wants and whims. For example, a command economy may decide to produce only one or two kinds of milk, which means that consumers have few options when buying milk and their preferences may be ignored. Luxury or frivolous items may also be...