WORKING OF THE PRICE IN FREE MARKET SYSTEM
WORKING OF PRICE IN FREE MARKET SYSTEM
DAVID RJ ONGUTO
NCUK NUMBER: BH-14-0027
Table of Contents
INTRODUCTION……………………….. 3
FREE MARKET SYSTEM……………… 4
RESOURCES SCARCITY AND CHOICE………………………………….. 6
WORKING OF THE FREE MARKET SYSTEM…………………….. 8
DEMAND…………………………………….. 9
SUPPLY…………………………………… 10
EQUILIBRIUM PRICE 12
FUNCTIONS OF PRICE……………. 13
INTRODUCTION
A Market system is the social network that permits interaction between buyers and sellers. It includes all the rules and regulations, the reputations and credentials of the companies and individuals involved. In all economies there exist three types of economic systems namely;
Free Market System
The centrally planned System
Mixed economies
The figure above shows the different types of market systems.
A) THE FREE MARKET SYSTEM
Also known as capitalist economies, A free market system is a market system in which the prices for goods and services are set freely by consent between sellers and consumers, in which the laws and forces of supply and demand are free from any intervention by any form of authority.
From the above it is easy for one to see the differences in economic systems. A Centrally planned economy has one person or group who controls what is produced. Businesses work together to produce commodities that are planned and distributed by the government. They are also known as command economies because everyone must follow specific guidelines set by the controlling authority.
A mixed economy is one which has combined elements of the above two economic systems and the individuals make most decisions. All world economies are mixed economies what varies is the degree of mixture.
Resources, Scarcity And Choice
Economic resources are the factors used in producing goods or providing services. These resources are scarce and are used to satisfy mans limitless wants, hence, all economic goods/resources have opportunity cost which is the next best
DAVID RJ ONGUTO
NCUK NUMBER: BH-14-0027
Table of Contents
INTRODUCTION……………………….. 3
FREE MARKET SYSTEM……………… 4
RESOURCES SCARCITY AND CHOICE………………………………….. 6
WORKING OF THE FREE MARKET SYSTEM…………………….. 8
DEMAND…………………………………….. 9
SUPPLY…………………………………… 10
EQUILIBRIUM PRICE 12
FUNCTIONS OF PRICE……………. 13
INTRODUCTION
A Market system is the social network that permits interaction between buyers and sellers. It includes all the rules and regulations, the reputations and credentials of the companies and individuals involved. In all economies there exist three types of economic systems namely;
Free Market System
The centrally planned System
Mixed economies
The figure above shows the different types of market systems.
A) THE FREE MARKET SYSTEM
Also known as capitalist economies, A free market system is a market system in which the prices for goods and services are set freely by consent between sellers and consumers, in which the laws and forces of supply and demand are free from any intervention by any form of authority.
From the above it is easy for one to see the differences in economic systems. A Centrally planned economy has one person or group who controls what is produced. Businesses work together to produce commodities that are planned and distributed by the government. They are also known as command economies because everyone must follow specific guidelines set by the controlling authority.
A mixed economy is one which has combined elements of the above two economic systems and the individuals make most decisions. All world economies are mixed economies what varies is the degree of mixture.
Resources, Scarcity And Choice
Economic resources are the factors used in producing goods or providing services. These resources are scarce and are used to satisfy mans limitless wants, hence, all economic goods/resources have opportunity cost which is the next best
Bibliography: http://www.businessdictionary.com/definition/market-system.html https://www.boundless.com/economics/textbooks/boundless-economics-textbook/principles-of-economics-1/basic-economic-questions-42/differences-between-centrally-planned-and-market-economies-155-12253/ http://www.shmoop.com/economic-systems/types.html http://kr.mnsu.edu/~cu7296vs/supdem.htm