According to the Houston Chronicle, advantages of a free market economy include freedom of innovation and the ability of customers to drive choices in addition to disadvantages such as the danger of the profit margin and market failures. Other advantages include a quick response to consumers' demands, a wide variety of services and goods, and efficient use of resources. However, disadvantages also include unemployment, ignored social costs, and unavailability of some goods and services.Know More
The Chronicle explains that business owners innovate new ideas, develop new products and offer new services in a free market economy. This innovation comes with little to no government interference in telling entrepreneurs what new products the public wants. The Chronicle also explains that consumers ultimately decide which products fail when they choose what to buy. However, the goal of creating a profit margin makes the free market economy dangerous ethically because sometimes business owners rank the pursuit of profit over the well-being of their employees and their customers.
The Chronicle further states that the free market economy has other potential harms if it is unchecked. For instance, far-reaching incidents such as the Great Depression of the 1930s and the real estate market crash of the early 2000s leave many people unemployed, homeless and without an income.Learn more about Economics
Countries whose economies attract minimal involvement of the government have a market economy. According to a 2013 Index of Economic Freedom, the United States, Canada, Denmark, the United Kingdom, Hong Kong and Mauritius have a market economy. Most market economies have a degree of state-dictated planning and are thus categorized as mixed economies.Full Answer >
A market economy is driven by supply and demand. Producers sell goods for the highest prices possible, and members of the labor force work for the highest wages they can earn. Determinations as to how goods and services are allocated are made primarily by markets.Full Answer >
An example of the way a market economy works is how new technology is priced very high when it is first available for purchase, but the price goes down when more of that technology becomes available. This kind of price fluctuation is a central component of a market economy. That is, supply and demand dictates prices.Full Answer >
A market economy is based on the principles of supply and demand, and lets business survive or fail without much interaction from the government. A pure market economy is impractical to implement, most market economies around the world have a component of government influence.Full Answer >