List of Pros and Cons of a Market Economy

The laws of supply and demand are what dictates market economies. A market economy is untouched by the government, which allows for a market equilibrium to be found on its own. In a market economy, the emphasis is placed on creating just enough of a product to meet the needs of the consumer. When evaluating a market economy, the pros and cons must be considered. The following list provides a more thorough examination of these benefits and drawbacks.

List Of Pros of Market Economy

1. Entities Act In Their Best Interest
Since there is no government influence, the consumer and the manufacturer are each able to act in ways that benefit their best overall interest. Consumers are able to search for the lowest prices in conjunction with the best quality, while manufacturers can worry strictly about profits, without having to follow any sort of government regulation.

2. More Efficient Production
Market economy is all about producing the products needed without wasting resources unnecessarily. As a result, this makes for much more efficient production from manufacturers. Since supply and demand is what regulates the marketplace, there is very little wasted production. A company will not produce products unless they know there is a definite consumer lined up.

3. Additional Economic Development
A market economy encourages an increased bond between manufacturers and consumers. The system rewards those who are innovative, which increases expansion. When this happens, a nation’s () expands and the standards of living are raised for all classes.

List of Cons of Market Economy

1. Increased Production Costs
In a market economy, the supplier is not the one who typically foots the bill for production costs. Instead, this bill is handed down to the consumer. The supplier usually does not take care of costs that are attributed to the production of their goods. For example, an increase in pollution as the result of production becomes the consumer’s problem, not the manufacturer’s.

2. Needed Regulations Do Not Occur
Manufacturers and consumers are not always able to come to a consensus agreement that works for all parties involved. Supply and demand can be tough to negotiate in certain instances and without the ability to ask a government for help, a market economy can suffer in these sorts of cases. To be able to ensure order, an economy needs a government that is able to intervene.

3. Market Driven By Want, Not Need
When the consumer receives an increased say in what drives the market, they will often choose by want, instead of need. This leads to a serious discrepancy when goods receive different value based on the concepts of supply and demand. This is why allowing the consumer to play a role in driving product values can be problematic.