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A Perspective on Market Economy

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Market economy has come to be accepted as a norm across the world with many developing countries like India and China moving towards a full-market oriented economy. One may ask if there is a flaw in it. Of course, nothing in this world is perfect. It depends on one's criteria. To find a system that suit everybody's needs is literally impossible.

In a “perfect world”, free market leads to complete efficiency bringing about the optimal distribution of a country’s resources. This would only happen in a state of equilibrium or when demand equals supply and there is a unique price for every commodity in question. Buyers are free to purchase any commodity which they like and in whatever amounts. The seller of a good or its producer can also produce whichever product they want to and also increase the capacity of any individual commodity depending upon the forces of the market. Producers are free to undertake the risks and rewards associated with increase in production. There is no state intervention in the functioning of the forces of the market. The role of the state is limited to ensuring proper transparency in the prices charged by the sellers of the concerned commodity.

The biggest advantage that a market-oriented economy enjoys is the determination of a unique price determined by the demand and supply in absence of any monopolistic or oligopolistic influences. The decision of what to produce, for whom to produce and in what quantities is taken by the market forces and not determined by the state.

As price and money has become critical elements in market-driven world, most people work harder. Competition between different firms leads to increased efficiency, as firms do whatever is necessary to lower their costs and improve their qualities. There is more innovation as firms look for new products to satisfy consumers' needs and cheaper ways to produce. The forces of production undergo rapid development. Eventually, a great variety of consumer goods become available. These characteristics of market economy make it keeps refining itself.

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