In order to understand what are the main advantages and disadvantages of the market economy, try to understand the definition of its concepts and basic functions.Market economy consists of many participants who take independent economic decisions.If those decisions were not connected in any way with each other, the system would represent chaos.How does the communication between private actors?
Market
Communication provides the market - the basis of the economy.In an ideal market for the same product is set to the same price in a certain period of time.
contribute to this:
• unrestricted continuous demand;
• increasing the number of business entities;
• greatest possible awareness of these subjects;
• freedom of competition, both among consumers and among the sellers;
• mobility of production factors.
elements of the market as the main managers of the market system
Advantages and disadvantages of the market economy as defined by the basic elements of the market and the variety of forms of ownership (private, cooperative, joint stock, state, etc.) for its high competitiveness.
The main elements of market infrastructure:
• finance market;
• Market factors of production;
• Consumer market of goods and services.
All these elements are interconnected, and if properly balanced, then the economy is functioning smoothly.
What problems solves the economic system?
Before answering the question, what the advantages and disadvantages of the market economy are crucial, it is important to know why it is generally necessary, what the main problem is solved.Actually, any global economy is intended to solve the contradiction between the unlimited material needs of society and the limited, or even rare economic resources.
This contradiction can be expressed in more than five simple questions:
• what products must be done;
• how much;
• manner;
• who will consume it;
• how fast the system adjusts to changes in consumer demand.
Depending on the quality of the answers to these questions and defined the advantages and disadvantages of the market economy.These are the main questions that should meet the economic system.
Advantages and disadvantages of the market system
Advantages
• The effectiveness of resource allocation.
• Have the freedom of choice for consumers and entrepreneurs.
• The ability to meet the diverse needs, improve the quality of goods and services.
• The ability to quickly and easily adapt to changing market conditions.
• Initiation introduction of the achievements of the developing scientific and technological progress.
• Ability to operate in uncomfortable conditions of limited information.
Disadvantages
• fade competition.
• unevenly distributed income.
• Instability of development and are not always effective production.
• Inflation and unemployment.
• The trend toward monopolization.
• Inability to provide basic scientific research.
Trends
system of market relations will never stand still - is its main advantage and disadvantages of the market economy are offset tendencies to correct them.A major role here played by government regulation and changing forms of all business sectors.New forms of employment relationships, where employees are involved in the management of the company or firm.The state has the opportunity to influence the contraction or expansion of the competition.The share of small businesses, more mobile to changing conditions.Although in the first place is still worth a profit, companies are interested in maintaining their competitiveness and to take this targeted action.And, most importantly, the market economy is focused on meeting consumer demand.
