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Definitions of a Market Economy
The market economy is based on the assumption that consumer choice will influence market forces with no direct influence from the government. Everything from the market economy is based around supply and demand. Consumers show their satisfaction by purchasing goods at the lowest cost which raises production. The USA would be classified as a market economy since their system is based on wealth and power exercised by the individual and corporations. The price mechanism decides prices in the market if there is a shortage of a good or service then the price rises and if there is a surplus then the price will drop. Also because of the interaction between supply and demand prices will fluctuate but will always seek to head towards the equilibrium price. The downside of a market enjoy is that it encourages socially unacceptable behavior in terms of porn and pedophiles. The market economy is a free for all system where workers try to maximize their wages relative to the work they are doing.
Mixed Market Economy
The mixed market economy there is a balance between government and market forces. In the likes of hospitals, roads and education the government produces the goods and services at a regulated price which is known as the public sector. On the other side the private sector the majority of goods are produced by free enterprise. . The central fact about market economies is that there is no center. One of the founding metaphors for the private marketplace is that of the "invisible hand." The Term used by Adam Smith to describe the natural force that guides free market capitalism through competition for scarce resources. (1)According to Adam Smith," in a free market each p ...