Question

Brian has just finished college. He wants to set up a small business to make and sell fireworks. He registers his company and acquires a license from the government. He finds that most of his competitors are selling fireworks at an extremely low price. He would like to make more money, so he decides to innovate and develop better fireworks. He sells his fireworks at a higher price, and they are a huge hit with the customers. After a few years, he earns enough profit to set up a bigger fireworks factory that complies with the government’s health and safety regulations. He even starts exporting fireworks overseas. Which type of economy does this scenario describe?

Answer 1

E market economy

market economies are based of growth of a business

also the business is not controlled by the government (even though there are safety regulations) which is also a sign of a merket economy

Answer 2

The correct answer is the market economy.


This is a perfect example of the market economy where the market is created and guided by the the forces of supply and demand. This example perfectly shows that as everything from the investment, production and distribution are guided by what the supply and demand dictate.