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Economics

Part A
Question 1
The market system could be illustrated as the place where the price is determined by unregulated supply and demand. In the market system the greater part of the production, distribution and exchange of goods are controlled by private owned corporations and individuals. The markets alone are normally used to allocate scarce resources e.g. land, labour and capital. But the pricing of the goods are chosen solely by the country’s citizens and businesses, without the help of the government. To best understand the market system it may be best to compare it to other market systems, for example, the command and market economy systems.
The way the command economy system works is that, the government controls the production, distribution and the exchange of goods and services. It also controls the resources of land, labour, capital and the pricing of the goods. In this type of system extensive bureaucracy is needed to allocate resources. If the government makes a wrong or inappropriate decision it may lead to the production of excess goods which leads to excess supply or it may lead to a shortage of goods that may lead to excess supply.
The mixed economy system on the other hand the production, distribution and exchange of the resources, that is land, labour, capital and the pricing of goods, are controlled by individuals, private corporations and some intervention from the government. In this type of system high taxes may be needed to provide the revenues to support government intervention. This intervention may reduce incentives and discourage output investment and employment.
The exchange of scarce goods and services at non-fixed prices in the market system society are coordinated by the interaction of buyers and sellers. These markets are not planned or controlled by a central authority. The government has no central or direct role in resource allocation. The government’s main task is to provide the infrastructures that are needed to allow the...