Question

Evaluate and explain the following statements: a. The market system is a profit-and-loss system. b. Competition is the disciplinarian of the market economy.

Answer 1

Answer is given below :

Explanation:

• There are buyers and sellers in the market. Buyers are likely to call everyone who looks appropriate, if there are only a few. Sellers want to sell products or services to get product surplus. Therefore, the whole system depends on earning profit or loss.
• Improve on their own in a free financial market; Suppose the consumer surplus exceeds the producer surplus, with some sellers leaving the market, thereby reducing supply and increasing price
• This reduces the surplus of additional customers.
• There is competition between buyers and sellers. Such competition will stabilize the market economy. Due to this competition the market has to reach equilibrium on its own; There should be no regulatory control
• The vertical axis represents the value and the horizontal axis represents the size. Suppose the market price is P1, where supply exceeds DV demand; This is a surplus sector.
• Some suppliers leave the market because their products are not sold; From the availability of products it reduces the supply from V to E, as well as increases the demand
• This creates demand‌ from D to E. Point E, the equilibrium level, is now established, where demand and supply control outweigh control; Equilibrium price p.