what do you mean by market mechanism system and explain merits and demerits
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In economics, the market mechanism is a mechanism by which the use of money exchanged by buyers and sellers with an open and understood system of value and time trade-offs in a market tends to optimize distribution of goods and services in at least some ways.
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Advantages of market system
- Market system automatically responds and adjusts to the people’s wants
- Wider variety of goods and services
- Competition pushes businesses to be efficient
- Government does not have to take decisions on basic economic questions.
The disadvantages of market system
- Factors of Production is not employed if it is not profitable
- Market system may not produce certain goods and services
- Free market may encourage harmful goods
- Production may lead to negative externalities
- Free market economy may increase the gap between the rich and the poor
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