Question

In the lesson you learned that a market economy is where the prices of services and goods are determined through a free system. Based on what you learned in the lesson, describe two advantages and two disadvantages of this type of economy.

Answer 1

Answer:

ADVANTAGES OF MARKET ECONOMY

1, Consumer sovereignty

2. Innovation

DISDVANTAGES OF MARKET ECONOMY

1. Unhealthy rivalry

2. Market failure

Explanation:

Market economy also called free market economy or capitalist economy is a  type of economic system that encourages free ownership of productive resources. in this type of economy, the ownership of productive resources is in the hands of the individuals, and the price system allocates resources

ADVANTAGES OF MARKET ECONOMY

1, Consumer sovereignty - In a market economy, the concept of consumer sovereignty is recognized, the consumer dictates the market offerings through the price system, what the consumers want will have high demand and that would be an incentive to the producer to supply more and vice versa.

2. Innovation - The drive to get a larger share in a keenly competed market, with competition within and without, will make businesses to spend on research and take innovative steps if they want to remain in relevant in the business landscape.

DISDVANTAGES OF MARKET ECONOMY

1. Unhealthy rivalry - The cut-throat competition in the market economy will lead to unhealthy rivalry among competitors, businesses would be out to take unfair advantage over the other with its attendant consequences. This may lead to supply of substandard products.

2. Market failure - The market forces as efficient as they are, sometimes failed to allocate resources optimally. The market failure was one of the courses of the greet depression.