Question

Describe 2 advantages and disadvantages of market economy

Answer 1

1. Goods and services are produced according to consumer demand. The structures of a market economy ensure that the goods and services the most people want are produced since consumers will pay the highest price for the items they want the most, and businesses will produce those items that will return a profit.
2. Efficient production. A market economy rewards the most efficient producers since efficient producers will earn more money than inefficient producers.

Disadvantages


1. Competitive disadvantages. A market economy is defined by cutthroat competition, and there is no mechanism to help those who are inherently disadvantaged, such as the elderly or people with disabilities. The caretakers of those people are also at a disadvantage, as they must allocate their time and resources towards caretaking instead of working within the market.
2. Lack of optimization. The economic cost of a market economy is that its participants may not be optimized. An inherently disadvantaged person may have no choice but to work a minimum-wage job to support their family instead of becoming a doctor or a scientist.

Answer 2

Benefits of a market economy include increased efficiency, production, and innovation. Disadvantages include monopolies, no government intervention, poor working conditions, and unemployment.