The market based economic system is a system in which we have to fix prices based on law rather than the involvement of the government. This kind of market system is free from government subsidies and regulations. Nowadays, various governments are claiming market-based economic systems. Anyhow, there is no complete market based economic system. Its reason is that there is complete or less involvement of the governments in the economic systems. The economists are saying that it is one of the most efficient economic systems. Anyhow, the critics are not supporting this economic system. Here, we will discuss the market based economic system with limited government involvement.
Advantages
In the market based economic system that has limited government involvement, we have to promote goods with little or no involvement of government agencies. It allows us to develop a relationship between product supply and consumer demand. It has some advantages.
Absence of Red Tape
It is one of the most important advantages of the market based economic system. Coursework Writing Services has strong command in search work so they said about this the businessmen can get an opportunity to work in the absence of bureaucracy and red tape. This thing can reduce the administrative costs of the products. The companies can spend this money on other things like research and development processes etc.
Freedom to Innovate
The market based economic system allows the businessmen to develop new ideas. As a result, they can introduce new products and services in the market. If the public requires new products, the entrepreneurs can launch these products without getting permission from the government. They also try to meet the needs of the customers through innovation. For this reason, they study the demands of consumers and research the proper trends. The innovation will also create an atmosphere of competition among the firms. The firms will try to add more innovative features to the existing products.
Customers Drive Choices
In the market based economic system, the government agencies can’t make decisions about the success or failure of the products. The customers have to make decisions about the success or failure of the products. For example, if two companies are providing the same products with similar features, customers have to vote for these products based on their purchases. As a result, the customers can decide which product will survive in the market. The customers will also decide the price point of the products. If a product has a very high price point, they don’t buy it. As a result, the companies have to rethink the price point.
Motive of Self-Interest
The market based economic system will run on the motive of self-interest. No doubt, the consumers can set their motives to get the greatest benefits from the limited budget. The entrepreneurs can also set their motives to earn the highest profits from the products. As a result, the consumers will get the freedom to buy the best products and services that can fulfil their needs. Here, workers will also get lots of benefits. They can easily find suitable jobs based on their qualifications.
Private Ownership
If the government will show limited interest in the market based economic system, individuals and private businessmen will own all the things. Individuals and private businessmen have to arrange their natural capital resources. It means that governments will not provide equipment and buildings for the growth of businesses. When businessmen will grow products and services, they will also become their owners. The government will have to provide freedom of negotiation to the private owners. They can legally bind their contracts. As a result, the governments can provide permissions to the people to obtain and use these resources based on their requirements.
Disadvantages
No doubt, if we will introduce the market based economic system, we can create a system of markets and prices that will run together. Anyhow, along with these advantages, it has some disadvantages.
Limited Products Ranges
This system is providing freedom to the businessmen to make desired profits by selling products and services. If they fail to generate profits from the specific products or services, they will limit the production of these products and services. This thing will limit access to products and services. This kind of situation will last impact on a specific group of people. For example, if it is too expensive to transport goods in the rural areas, the companies will not deliver goods in these areas. As a result, the rural area people will be deprived of these products.
Dangers of Profit Motive
If you have introduced this kind of economic system, it means that you have given the freedom to the companies to make profits. To gain this profit, the companies have to sacrifice the safety of the workers and some environmental standards. In some cases, the companies have to follow unethical behaviour to earn this profit. When companies take cost-cutting measures, they use low-quality ingredients. Here, we can put an example of the oil spill in 2010 in the USA. Due to this oil spill, we have to face the largest environmental impacts.
Market Failure
Sometimes, the market can spin out of control. Due to this out of control spinning of the market, we have to face some severe impacts. Here, we can take an example of the real estate market crash in 2008. These kinds of failures can devastate millions of lives. This thing has also become a cause of homelessness and unemployment for millions of people. If government agencies will show involvement in the economic system, companies will focus on the slow and steady gains. In the absence of the involvement of the government agencies, the companies try to seek short-term profits. This thing can become a cause of market failure.
Conclusion
In the market based economic system, the government agencies have little or no control over the production of goods and services. It doesn’t allow government agencies to control the prices of different products and services. No doubt, this kind of market system provides a wide range of freedom to companies. As a result, the businessmen can enjoy lots of benefits. For example, they get a chance to work without the involvement of red tape. They can also get the freedom of innovation. This system can also allow customers to drive choices. Anyhow, limited product range, dangers of the profit motive and market failures are some disadvantages of this economic system.
