Market economic system

Section 2

what do changes in price cause

a shift in resources, from making products that are less popular to making those that are more popular

what factors are key roles in market economic systems

• competition

• high profts

• high wages

what are the advantages of a market economic system

• output reflects consumers taste

• consumers have more options

• prices are low to stay competitive

• hard work is encouraged due to competition

what are the disadvantages of a market economic system

• output does not reflect full cost

• firms can abuse their market power

• resources become immobile

• products consumers want but cannot be charged for like street lights will not be produced

what does a market system reward

it rewards efficiency and punishes inefficiency

when is allocative efficiency achieved

when products desired by consumers are made in the right quantity

when is a firm productivly efficient

when it produces at the lowest possible average cost

what does innovation lead to

dynamic efficiency

what happens in a mixed economy

resources are allocated by means of both price mechanism and government decisions