Student Number: 11AL0740
Topic: Market Systems in Allocating Societal Resources
Word count: 1102 (not including the Bibliography)
Market Systems in Allocating Societal Resources
With the development of society, the availability of resources has become limited. Therefore, it is of vital importance to develop an understanding of resource allocation. A free market (a market in which there is no governmental intervention and regulation) (Wikipedia, online) in this sense, plays a key role in allocating resources. In this essay, along with some of the principles of economics, I will analyze the market system and its outcomes， and elaborate on the transformation of the Chinese economic system. Then, I will demonstrate the market system’s benefits and limitations by using the real world example of China’s economic system. The market system consists of three major markets: the product market, the labour market and the capital market. The market system is characterized by a set of interconnecting relations (Dermot McAleese, Economics for Business, 2004), in which price and competition are very important factors. I am going to take China as an example in the following paragraphs. As is known to us, China’s economy has experienced a transformation from planned economy to a combination of planned economy and market economy. So let us have a glimpse of how the different role market plays in these completely different economic systems. In the early 1880s, planned economy dominated China’s economic system. Planned economy assumes that the wisest and fairest allocation of resources is achieved though government planning of what is produced and who gets it at what cost. Most enterprises and corporations are initiated and financed by the government. Most resources of production are owned by the state. (Xiaoliang Wei，GRE reference book，2006) In a word, the societal resources are allocated based on the government’s command and instruction. It is the government...