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Market Economy Swot Analysis

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Hana Awadalla 900142735 Dr. Adel Beshai ECON202102 What do we want from our government? A market economy is an economy in which decisions concerning investment, production, and distribution are grounded on supply and demand, and prices of goods and services are determined in a free price system. In this form of economic organization, firms, motivated by the desire to increase profits, buy inputs and produce and sell outputs. The government has several roles to play in a market economy; according to Adel Beshai, “its role is pivotal to the success of liberalization.” These roles include the promoting of efficiency, the income of distribution and the growth and stability of an economy. The roles of the government are to be prominent in three …show more content…

The scarcity of public goods is furthermore seen as a market failure, and is the uninterrupted result of a positive externality being produced when a person contributes to a public good which benefits others whether they contribute or not. Correspondingly, surplus pollution is seen as a market failure resulting from the negative externality of people commanding uncompensated expenses on others by emitting pollutants into the environment. However, externalities are just as frequently the result of government activity as they are market activity. For example, many government transferals are better seen as negative externalities encouraged by the desire of politically prominent groups to benefit at the expense of others. Another role that the government plays in a market economy is the idea that agencies act to encourage or discourage the consumption of certain goods and services. To influence the arrangement of expenditure, the government tries to encourage certain kinds of performance and discourage others. Lower rates of indirect tax are employed on products that the government is trying to encourage people to buy; for example, unleaded petrol has a lower rate of tax than leaded since unleaded is sounder for the environment, therefore the use of it is encouraged

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