The market economy is a system of economic relations in society and is based on the recognition of the right to private property, freedom of choice, and competition. The market economy has special features and characteristics inherent in it.
Private property
The market economy is characterized by the presence of the concept of private property, which provides each of the economic entities with a certain degree of economic independence and wealth. Every person who owns private property has the right to dispose of it at his own discretion - for example, to sell or rent.
Pricing
Prices for goods and property correspond to the pricing system, which is also inherent in a market economy. Unlike other economic systems, the value is regulated by the market independently and is not assigned by anyone - prices appear as a result of the interaction of supply and demand parameters for a particular product.
Competition and free enterprise
Another important feature of a market economy is competition, which emerges in the context of free enterprise and choice. Free enterprise enables the consumer to buy or sell any product he desires.
Depending on the demand, the number of units produced will also be regulated.
Competition forces us to produce the goods that consumers really need. Entrepreneurs who are able to provide the market with the highest quality products remain on the market and receive greater profits than those entrepreneurs whose products are not in demand among the population.
The role of the state and the form of ownership
Under the dominance of a market economy, the state plays a minimal role. It monitors the fulfillment of due obligations by the sellers and can recover the property if the necessary conditions are not met. The state has no right to interfere with pricing and can participate in market interactions on an equal footing with other market participants. The market economy is also characterized by the presence of several forms of ownership.
Along with private, collective, state and community enterprises operate.
Pros and cons
The advantages of a market economy include the freedom of choice of actions on the part of both the consumer and the buyer. This market easily adapts to new conditions and contributes to the production of quality goods and services. Among the shortcomings of the system, one can note the inability to resist monopolies that restrict the freedom of competition.
Also, the market causes side effects in the form of environmental pollution, and the system itself is not able to deal with the damage caused. Sometimes the market economy is characterized by growing differentiation in society and ignores the factors of income distribution among the population.
