News Analysis

Posted: September 3rd, 2013

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Source: U.S. Department of State

http://economics.about.com/od/howtheuseconomyworks/a/mixed_economy.htm

Economic Principles and Terms: Market systems, Demand, supply, Consumer, Goods and services, Economy, Business, mixed market, planned market, free market, government intervention, private ownership, laws of demand, economic policies, and prices, tax and revenue, entrepreneurs, resources, national economic output, micro economics, economic output.

News Analysis

Businesses in the United States of America are deemed to be operating in a mixed economy. The argument behind this lies behind the fact that both the government and the private businesses are simultaneously operating in the market. However, the free enterprise system in America solicits for private ownership in the economy (Conte, 5). The argument is that private businesses constitute majority of good and service production in relation to the overall national economic output, with two thirds of the overall economic output from the nation ending up satisfying personal interests with the remaining one third allocated to business and government. The role of the consumer in the mixed economy is deemed very fundamental that the market is sometimes though to be a “consumer economy’. In addition, the private ownership emphasis arises from beliefs related to personal freedom (Conte, 7). Excessive government power in the economy is a situation feared by all concerned parties, thus the endeavors of identifying means that will limit the government’s authority in dictating economic policies and use of resources. To argue for this school of thought, Americans believe that the forces of demand and supply would brilliantly dictate the proceedings in the economy if left unfettered. They would correctly fix the appropriate prices for goods and services.

Prices determine what and in what quantity production will be undertaken by a business. In relation to the law of demand, should people want more of a commodity than the economy is willing to supply, the price will automatically go up. Consequently, this will attract potential investors who will have identified the opportunity of producing more of the commodity to earn more profits (Conte, 9). On the other hand, if the demand for a particular commodity by consumers is less than what the economy is willing to offer, the price of the commodity will automatically go down, as producers will look to sell as reduced prices in order to avoid total loss. This system is in other words referred to as a market economy. The other scenario would revolve around a socialist economy, which compared to the market economy is characterized by governmental planning and ownership (with strategies such as setting price ceilings and price floors). American consumers and economists alike bear the notion that a socialist economy is inherently less effective in dictating proper market niches and operations. This is because government has a heavy reliance on revenues from tax and is therefore not competent in heeding to price signals or act upon forces exerted by demand and supply in the economy (Conte, 11).

This article is in direct connection with all that I have been studying in economics. In the market systems module in micro economics, I have managed to learn that there are three major types of market systems that include free market system, mixed market, and planned market system. Each of these market systems is unique with their distinct characteristics. I was able to learn how to analyze a market system and categorize accordingly with regard to the type of economy as well as the behavior of demand and supply of commodities. In addition, I managed to infer that the role of the consumer behavior toward a particular market system is dependent on the prices allocated to goods and services by the respective businesses. Among the three distinct market systems, the most notable difference revolves around government intervention. It is only in a free market system that there is absolutely no government control and is mainly filled by entrepreneurs.

Works Cited

Conte, C., and Karr A. An outline of the U.S. economy. Washington, D.C: U.S. Dept. of State, International Information Programs, (2001). Print