main characteristics of the market system

http://en.wikipedia.org/wiki/Market_system

The main characteristics of a market system, also known as a market economy or capitalism, are as follows:

1. Private ownership: In a market system, individuals and businesses have the right to own and control property, resources, and means of production. This allows individuals to make choices about how they use their resources and allocate them based on their own interests.

2. Economic freedom: Individuals in a market system have the freedom to make economic decisions regarding what goods and services to produce, how to produce them, and who to sell them to. Buyers and sellers are free to negotiate prices and make transactions voluntarily.

3. Competition: Competition is a fundamental aspect of a market system. It drives innovation, efficiency, and responsiveness to consumer demand. Within a market system, multiple buyers and sellers exist, and they compete to attract customers, leading to better quality products and competitive prices.

4. Pricing mechanism: Market forces of supply and demand determine prices in a market system. Prices act as signals to both producers and consumers, guiding their economic decisions. When demand for a particular good or service is high, its price tends to rise, encouraging producers to supply more. Conversely, when demand is low, prices tend to fall, signaling producers to reduce supply.

5. Profit motive: The pursuit of profit is a driving force in a market system. Individuals and businesses aim to maximize their profits by meeting consumer demands and offering competitive products or services. Profit acts as an incentive for innovation, investment, and risk-taking.

6. Limited government intervention: In a market system, the role of the government in economic affairs is generally limited. The government's primary function is to establish a legal framework, enforce contracts, protect property rights, and ensure fair competition. Government intervention is typically limited to areas such as enforcing regulations, addressing externalities, and providing public goods.

7. Mobility of resources: A market system allows for the mobility of labor, capital, and resources. In response to changing market conditions, individuals and businesses have the flexibility to move resources to where they are most productive and profitable. This mobility facilitates a dynamic and efficient allocation of resources within the economy.

These characteristics collectively define a market system and provide the foundation for economic activity, entrepreneurship, and growth.

The market system, also known as a market economy or capitalist system, is characterized by several key features:

1. Private Ownership: In a market system, resources, land, capital, and businesses are predominantly owned and controlled by private individuals or corporations. This means that individuals have the right to own and use property as they see fit, provided they do not infringe upon others' rights.

2. Free Competition: Market systems thrive on competition among businesses. Multiple sellers and buyers exist for goods and services, and businesses have the freedom to enter or exit the market. This competition encourages innovation, efficiency, and the production of goods and services that meet consumer demands.

3. Supply and Demand: Market systems rely on the forces of supply and demand to determine prices and allocate resources. The interaction between buyers (demand) and sellers (supply) determines the equilibrium price and quantity of goods and services in the market. When demand exceeds supply, prices tend to rise, and vice versa.

4. Profit Motive: In a market system, businesses are driven by the profit motive. They aim to maximize their profits and financial gains by producing goods and services that people are willing to pay for. This profit incentive encourages businesses to be efficient and responsive to consumer preferences.

5. Consumer Sovereignty: In a market system, consumers play a crucial role in shaping the economy. Their preferences and purchasing decisions determine what goods and services are produced, how they are produced, and who produces them. Businesses strive to cater to consumer demands to attract customers and generate profits.

6. Limited Government Intervention: Market systems are characterized by limited government intervention in economic activities. While governments play a role in maintaining competition, enforcing contracts, ensuring property rights, and regulating certain industries, they generally do not control or direct the majority of economic decisions.

It is important to note that while these characteristics are common in market systems, no pure market economy exists. Most countries employ a mixed economic system that blends elements of both market and planned economies.