The market economy

4. THE MARKET ECONOMY THE MARKET ECONOMY -The market economy or capitalist economy is the economic system based on the following principles: 1.

Free competition - The companies have complete freedom o operate in the market.

- In order to survive, they need to maintain their profits by: Reducing costs Increasing incomes 2.

Private property - This guarantees that individuals and companies have: the right to own the resources necessary for production the oppportunity to accumulate wealth 3.

Respect for individual autonomy - A person is free to make economic decisions as a : - producer - Owner - consumer 4. The free market: - The price is determined by: - the law of suply and demand - the need to cover the cost of production.

- The market sitation - Intervention by the State to guarantee access to basic necessities

4. THE MARKET ECONOMY COMPARING ECONOMIC SYSTEMS - An economic system is a system of production and exchange of goods and services and the llocation (distribuciรณn) of resources in a society.

THE MARKET ECONOMY OR CAPITALISM - Economic agents adapt to different circumstances.

- The amount, variety, prices and quality of products are adjusted on demand.

- This system can lead to poverty, political corruption and underground economy, It can also cause inequality when competition prevail (prevalece ) over coopration.

- It can cause environmental problems without adequate regulation.

4. THE MARKET ECONOMY PLANNED ECONOMY OR COMUNISM -The economy is centrally planned by the State.

- This system is found in countries like Cuba and North Korea.

- Disadvantage: The consumer demand is greater than the supply, due to this there are supply problems.

MIXED SYSTEMS - In the most- developed countries, the State intervenes to control inequality.

- The principles of the market econom are compatible with access to public services for the general population.

- This system ensure the wellbeing of the majority of population