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Class : 11
Unit : Economics

Write the concept of market economy. Explain its features.

Ans : It is an economy system in which there is free competition where decisions regarding resources allocation, production, consumption, price etc. are determined by the forces of demand and supply with limited government interventions. In other words, market economy is an economic system which resolved basic economy problem that is what, how and for whom to produce through the interaction of demand and supply. There is no government intervention in economy activities. It is also known as capitalist economy or free market economy or laissez faire economy. # Features of market economy. Ans:- The main features of market economy are explained below: i) Competition:- There is free competition in the market economy. Competitions exist between seller to attract customers, among worker to get job and among the buyers to obtain goods and services to satisfy their wants. ii) Right of private property:- There is right of private property in market economy. It means the owners have right to own, control and dispose productive resources such as land, building, factories etc. iii) Freedom of choice:- There is freedom of choice in market economy. It means a firm is free to decide what to produce, workers are free to choose occupation according to their qualification and consumers are free to buy goods and services. iv) Consumer’s sovereignty:- In the market economy, consumer is supposed to be supreme and is compared to be king. The goods and services are produced according to demand of consumers. v) Market mechanism:- This economy work through market mechanism. It means that economy problems are solved through the operation of demand and supply forces which determine equilibrium price in the market. vi) Limited role of Government:- There is very little role of government in free market economy. The role of government is to maintain law and order and create infrastructure that helps to increase production and overall economic development. vii) Profit motive:- The main objective of free market economy is earning profit. All the decisions regarding what to produce, how to produce and for whom to produce are taken on the basis of profit but not for social welfare.
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