Market Economic System

A free market economy is one in which the allocation of resources and the three basic economic questions are decided by firms, households and consumers in the private sector.

Advantages: Wide variety of goods and services

Firms will respond fast to changes in consumer choices

Taxes and regulations are minimal

Profit leads to research and development which leads to new products made using the latest and most efficient production methods.

Disadvantages: Exploitation of environment

Merit goods are not produced enough

Demerit goods are produced in excess

Products are only made for consumers who can afford it

Government intervention

Focus on regulation

Act as a consumer(eg: buys and sells medicine at low rates) Acts as a producer(eg: schools and medical sides) Builds infrastructure