According to wikipedia, a market may be of a variety of different systems, institutions, procedures, social relations and infrastructures whereby persons trade and goods and services are exchanged, forming part of the economy. The basic concept of market is any structure that allows the exchange of goods, services and information. In market there are the buyers and the sellers. Markets vary. There are financial markets, prediction markets, and so on. Market can be seen in two ways: as a study of abstract mechanism whereby supply and demand meet and deals are made. And second it is used as a symbol of an integrated and cohesive capitalist world economy.
Market system is any systematic process enabling many market players to bid and ask. They help bidders and sellers interact and make deals. Because a market system relies on the assumption that players are unequally enabled, a market system is distinguished specifically from a voting system where candidates seek the support of voters on a less regular basis.
An economic system is a system used to allocate resources because resources are limited. An economic system can be defined as a basic means of achieving economic goals which is inherent in the economic structure of a society (B.B.G Dictionary of Business Terms, 1987). The major function of an economic system is to work out the basic economic problems which are; *What is to be produced, *How is it to be produced, *For whom to produce and *How efficient is the use of resources. These economic problems are caused by the fact that resources are limited but human wants are unlimited. Therefore, every country desires to adopt an appropriate system which will result in efficient allocation of resources so as to avoid scarcity. There are three major systems adopted which are; Command Economic System, Mixed Economic System and Free Market Economic System. In a command system resources are allocated by the government through the planning system. The main actors in this system are the government, consumers and workers. All factors of production are owned by the government. This system has been linked with the former communist regimes of Eastern Europe and Soviet Union and China while the mixed economic system resources are allocated by both the government and private individuals with the help of the planning mechanism and the market mechanism. This is a very confusing system because it is believed that the roles of government and private individuals often clash, because there is the belief that too much government spending is problematic for the private sector meanwhile the government is expected to prevent market failure. The Market system of economy which is also called the price system simply put is a means of allocating resources in which the resources are allocated by the “market mechanism” and the major economic problems are resolved by private individuals (Anderton, A. 2006). It can be seen as a type of laissez-faire economy (Laissez-faire is a French expression for “let people do as they choose”). Market mechanism according to the Academic’s Dictionary of Economics by K.B. Kalra (2006) can be referred to as the free and unhindered inter play of the two forces of demand and supply in the determination of the price of the product. The resources are allocated according to the spending decisions and purchasing power of the consumers subsequently they are seen as supreme. The market system is such that the forces of demand and supply work to allocate resources to the best of its ability. The main actors in the market economy are; the consumers, the producers and the owners of the factors of production (Anderton, A. 2006). Countries which have adopted this form of economic system are U.S.A, Germany, Japan, Britain, France, Italy and Canada.
In the market economy the ownership of all factors of production by private individuals is essential in the market economy. The government is only expected to own a...
Bibliography: Anderton, A. (2006) Economics (Fourth Edition). Causeway Press Limited.
Anderton, A. (2002) Economics for GCSE (Second Edition). Harper Collins Publishers.
Grant, S.,et al. (2003) Economics AS for AQA. Heinemann Educational Publishers.
Kalra, K.B. (2006) Academic’s Dictionary of Economics (First Edition) Educational Printing and Publishing.
Please join StudyMode to read the full document