Market Economy: Pros, Cons, and Examples
The market economy is delivering miracles by the minute and yet we hardly notice or care. Worse, we denounce the realization of this dream of all of history, this coming of heaven on earth and call it decadent and dangerous.
― Jeffrey Tucker, It’s a Jetsons World: Private Miracles and Public CrimesIn a market economy, the market forces of demand and supply determine the production of any entity. The goods that are in demand are produced more. The factors of production can be employed by a private entrepreneur. Everybody has a freedom to choose their own way to utilize the resources. Accordingly, produce goods in any field of their choice. Since demand and supply influence economic decisions, consumer is the king in a market economy.
Consumers’. Preferences are the ruling policy in a market economy. Goods that have higher demand will have higher prices. However, a shift in demand will immediately impact the price of the product. The question of scarcity is answered by market forces. Individuals can own property, sell it. Pass it to the successors. This is no restriction on the amount of assets one can acquire, given that the individual possesses the purchasing capacity.
Features of a Market Economy
❏ Economic decisions influenced by the forces of demand and supply.
❏ Complete freedom to utilize resources as per an individual’s purchasing capacity.
❏ No government intervention.
Ever recall a shopping list which had items in the grocery listed as Dole bananas, Starbucks coffee and Danon yogurt. This typical list has so many brand names that we have unconsciously associated with these raw products. So how in the world do these companies successfully market these products and form a trademark on our mind? Their marketing strategies are so unique that it not only creates a brand value, but also has consumers in the form of fans attached to their products. As there are so many big corporations involved in marketing these products, it's extremely important to keep innovating the marketing plan and keep launching new products in order to gain a competitive edge over the competitors.
The strategy basically involves using marketing techniques like positioning tactics and various promotional strategies to market this basic product. Tea since ancient times has been used for beauty treatments, as a soothing agent, as dye colors used on clothes and as a cleaning agent. Even now, the ever expanding tea market continues to grow despite hitting saturation. Tea has always been termed as instant wisdom. So how do marketers explore this potion of wisdom to their benefit? Tea also has medicinal properties and is favored more than coffee now in the market. Also there are varieties in the tea market - black tea, green tea, ready-to-drink tea and fruit teas, which have already captured a major segment of the market. Following are some tips for tea marketing:
Researching the Market
It's necessary that you decide on the market you want your product to sell. Through market segmentation, you can divide the market on the basis of geographic, demographic, behavioral, psychographic factors and on price too. After segmentation, your goal will be more well-defined and it will help you to reach your customer in a...
❏ Private entrepreneurs can take up any production. Employ any resource, factor of production. Innovate according to his/her choice.
❏ Usually, profit is the main motive in a market economy.
❏ Individuals can privately own property.
❏ Due to greater competition and the quest to grab consumers’. Attention, entrepreneurs strive to produce superior quality products. There is increased willingness to take risks due to the freedom the entrepreneurs enjoy. Innovation will always benefit the consumers in the long run.
❏ With increased production and innovation, standard of living of the people in the country increases. The GDP of the nation increases, since there is initiative to employ new ideas in the market. Freedom of action and choice also boosts the morale of employees and workforce to perform better.
❏ With the nation’s economy improving, foreign investors are encouraged to invest in a fast-growing economy.
❏ Due to innovation, trained and skilled workforce increases. Technological advances are adopted quickly.
❏ A market economy rewards in the form of profits. This motivates the worker to strive harder, since an adequate compensation works as the best catalyst.
❏ Less government intervention and market forces may prove oppressive to those belonging to the lower economic strata of society. It may favor only those who have higher purchasing power. All the resources might be governed or owned by a select few.
❏ It might increase the gap between the rich and the poor.
❏ Unemployment and other social evils might increase, since profit is the motive of majority private entrepreneurs. Public goods might suffer. In some cases, the market economy may encourage production of harmful goods, such as drugs, even though their production may be profitable.
❏ Consumers’. Preferences can be manipulated and misguided by advertising and other marketing techniques. This might result into exploitation of resources for unwanted goods.
❏ There is scope for unhealthy completion and unethical business practice to seep in.
Examples of Market Economy
There is no country which has complete market economy in the true sense. Government intervention, to some extent, is always present, though in varying proportions, especially in case of manufacturing of public goods. This is done to ensure that supply of necessity goods aren't concentrated in the hands of a select few. Hong Kong, Singapore, Australia, United States, Switzerland, Denmark, are a few examples of nations that have a predominantly market economy.
While it's difficult to come to a consensus, there is no economic system that can be said is a fool-proof method to answer the question of scarcity in the most effective way. Like Charles Wheelan, (Naked Economics: Undressing the Dismal Science) has stated, A market economy is to economics what democracy is to government: a decent, if flawed, choice among many bad alternatives. Many traditional economists are wary of letting privatization seep in the economy. But, that can't erase the positive effects of market economy that are visible throughout the world.