MOTIVATION & MARKET
Market economy
a capitalistic economic system in which there is free competition and prices are determined by the interaction of supply and demand.
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Also called free market economy.
Characteristics
Private Property. Most goods and services are privately-owned. The owners can make legally-binding contracts to buy, sell, or lease their property.
Freedom of Choice. Owners are free to produce, sell and purchase goods and services in a competitive market.
Motive of Self-Interest. Everyone sells their wares to the highest bidder while negotiating the lowest price for their purchases.
Competition. The force of competitive pressure keeps prices low.
System of Markets and Prices. A market economy relies on an efficient market in which to sell goods and services. That's where all buyers and sellers have equal access to the same information.
Limited Government. The role of government is to ensure that the markets are open and working.
Command economy
a socialist economic system in which production and distribution of goods and services are controlled by the government and industry is mostly publicly owned.
Characteristics
The government creates a central economic plan.
The government allocates all resources according to the central plan. It tries to use the nation's capital, labor and natural resources in the most efficient way possible.
The central plan sets the priorities for the production of all goods and services. These include quotas and price controls
The government owns monopoly businesses.
The government creates laws, regulations, and directives to enforce the central plan. Businesses follow the plan's production and hiring targets. They can't respond on their own to free market forces.
Mixed economy
an economy in which there are elements of both public and private enterprise.
Characteristics
-Of a market economy.
It protects private property.
It allows the free market and the laws of supply and demand to determine prices.
It is driven by the motivation of the self-interest of individuals.
-Of a command economy
It allows the federal government to safeguard its people and its market.