A market economy is known as a “free market economy”. It is controlled by the law of supply and demand which in return will determine the price of services and goods. In a market economy the exchange of goods, services, and information take place in a freely according to the supplier and the buyer. Which means the entire market is merely driven by the sellers and the buyers with very few government regulations.
The positive on this type of economy is sellers can sell according to the demand of buyers, in return buyers pay for what they want, not necessarily what the government makes available to them. The downside to a market economy is there are sometimes needs for regulations to keep certain sellers from creating a monopolistic behavior. (Economy Markets, 2009) Another problem with a market economy is certain goods and services like law, medical, and education are inadequately provided. Medical expenses can be outrageous due to lack of regulations on cost. Socyberty 2009) A mixed economy permits private participation in manufacturing and production which in return allows healthy competition that can result in profit. On the other hand it also contributes to public ownership in fabrication and manufacturing which can take full advantage of social welfare. In a mixed market economy this system is governed by licensing and regulation policies. However, because the public also has control of the economy this facilitates transition. (Economy Markets, 2009)
The advantage of this type of market allows competition amongst providers with regulations in place to protect society as a whole. With the government being present in the economy it brings a sense of security to sellers and buyers. This security helps maintain a stable economy. Some disadvantages of a mixed economy are unsuccessful regulations may paralyze features of production. This in return can cause the economic balance to tilt. Lack of price control management can cause shortages in goods and can result in a recession.
A perfect example of this type of poor management in price control is the recent gas shortage experienced in the United States. (Leonard 2006) References Economy Markets (2009), Market Economy, Economy Investment & Finance Reports Economy Watch, Retrieved from http://www. economywatch. com/market-economy/ Socyberty, (2009), Disadvantages of the Two Extreme Economies: Free Market and Command Economy, Economics, Retrieved from http://socyberty. com/economics/disadvantages-ofthe-two-extreme-economies-free-market-and-command-economy/