According to resources on the Pierce College website, the price or market system creates advantages of economic freedom. It also lowers costs. The disadvantages include instability, monopolistic control and income inequality.Continue Reading
According to New York University class resources, a market economy has seven characteristics: people purchase what they demand, money is a necessity, people are forced to sell items for money, firms maximize profit above social needs, money commands discipline over the wealthy, scarce goods become rationed and labor is compensated. From these characteristics come several positive and negative realities.
The cited advantages are expanded to include increased competition, increased foreign investment, more consumer goods and increases in technical skills. Although, the disadvantages listed by NYU read much longer. These include growing unemployment, unequal political influence, increasing environmental destruction, egotistical attitudes, periodic crises and reduced social benefits. NYU also states that it is impossible for a market economy to exist without flaws, as both theoretical and empirical evidence prove against it. Additionally, experiencing economic growth or loss does not eliminate either positive or negative realities, but rather makes them appear smaller relative to their counterpart.
Yet, as Investopedia notes, statements containing subjective opinions (such as the price system) are considered normative economics in contrast to the fact-based characteristic of positive economics.Learn more about Economics
Advantages of the Association of Southeast Asian Nations include the elimination of tariffs between member states, which has reduced product prices due to increased competition within the market, and possible investment opportunities in the market. Among the disadvantages of ASEAN are the risk of an influx of cheap imports flooding local markets and the existence of poor governance structures in some member countries.Full Answer >
The quantity of a particular good supplied in a market increases as price goes up because suppliers have an increased interest in producing goods to generate higher amounts of revenue. This is a basic principle of the law of supply and demand.Full Answer >
The disadvantages of monopolies are not to the monopolistic companies themselves, but are instead suffered by their competitors and the overall market through the effects of pricing discrimination, price fixing and the influence of "corporate cartels" that are able to deter competition through shared directorship and company mergers. Monopolies can act as "price makers" and force their competitors to become "price takers." Lacking the economies of scale enjoyed by a monopolistic company, a smaller company can then be "priced out" of the market, which leaves the field open to the monopoly company.Full Answer >
There is no supply curve in a monopolistic market because the monopolist searches the market demand curve for the profit maximizing price, rather than simply accepting the market price. Because there is only one seller, the monopolist has market power.Full Answer >