What is the meaning of Market Economy.

 Market Economy...

The economic system on which every economic decisions are made on the basis of price mechanism is called market economy or free market economy. Various process of consumption, production, exchange and distribution are determined through pricing process. Private sectors are free to carry out their economic activities. The government neither support nor interfere the economic activities in the market. The government is only responsible to maintain peace and security, law and order & creates favourable environment to carry out economic activities in the country. The economy of US, UK, Australia, Japan etc are the examples of free market economy.

Following are the major features of Market Economy:

1. Private property: The fundamental feature of capitalism is the all the productive resources or means of production are owned by private individuals. Private property constitutes the essence of capitalism.

2. Freedom of enterprise: There is freedom of enterprise and occupation. Private individuals are free to use productive resources for the production of commodities of their own choice. Similarly, they are free to choose occupations of their choice.

3. Consumer’s sovereignty: There is sovereignty of consumers under capitalism. Consumers are free to buy and consume goods and services of their choice.

4. Price mechanism: Price mechanism is the essential features of the capitalist economy. Price mechanism is a process through which the market economy functions through the market forces via demand and supply.

5. Competitive nature: Capitalist economy is characterized by existence of competition among producers and among resources owners.

6. Profit motive: Profit motive is an integral part of capitalism. It is the motivating force for carrying out economic activities. All the economic activities are carried out to earn high rate of profit.

7. Least government interference: Under capitalist system, there is least interference by the government in economic activities and in the working of market forces.



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