The Market System is an economy in which only the private decisions of the consumers, resource suppliers, and firms determine how resources are allocated. I am going to talk about the six major characteristics of the market system.
1) Private Property- private individuals and firms not the government own most of the property resources (land & Capital) when combined with the freedom to negotiate binding legal contracts, it enables individuals and businesses to obtain, use and dispose of property resources as they see fit.
a. Property rights encourage investment, innovation, exchange, maintenance of property, and economic growth.
b. Property rights also extend to intellectual property through patents, copyrights, and trademarks.
2) Freedom of Enterprise and choice- This idea is closely related to private property (freedom of enterprise) is the freedom to obtain resources to produce their select goods and services and are allowed to sell in whatever market they choose. Freedom of choice enables owners to employ or dispose of their property and money as they see fit. It allows workers to enter and line of work for which they are qualified, and it ensures that consumers are free to buy the goods and services that best satisfy their wants and needs. These choice are free only within broad legal limitations.
3) Self-Interest- is the motivating force of all the various economic units as they express their free choice. In other words each economic unit does what’s best for itself. This gives consistency or balance to the economic system. Entrepreneurs try to maximize profit or minimize loss. Property owners try to get the highest price for the sale or rent of their resource. Workers try to maximize their utility and consumers try to obtain the products they want at the lowest price possible and apportion their expenditures to maximize their utility.
4) Competition- is the cornerstone of freedom of choice. It is the freedom of choice exercised in pursuit of monetary sources. This requires; independently acting sellers and buyers operating in a particular product or resource market. And the freedom of sellers and buyers to enter or leave markets on the basis of their economic self interests.
5) Markets & Pricing- are key characteristics of the market system. They give the system its stability to coordinate millions of daily economic decisions. It is know as the Coordinating Mechanism of the market system.
6) Limited Government- is an active but limited government. The government has the ability to increase the overall effectiveness of the economic system in several ways.
These six characteristics are key when it comes to evaluating a market system. Carefully analyzing these areas can lead to a healthy and successful company and product life.