These swift changes can, however, have serious consequences. You actually make the society better-off by creating new jobs and opportunities, even though you become a millionaire in the process, and you do it without any government help or intervention.Ī cornerstone of the market system is that production alters swiftly to meet changing demands. But when you have that car produced, you are in fact moving the production possibility frontier outwards. You want to make money out of it in your own interests. They can become millionaires, for example.
#NMS ECONOMY CHART FREE#
In a free market individual people are free to pursue their own interests. Since all firms are privately owned they try to make the largest profits possible. New advanced products and low prices are good ways to increase sales and profits. Firms tend to be highly competitive in such an environment. No planners have to be employed, which allows more resources to be available for production. The economy adjusts automatically to meet changing demands. Such a system is, at first view, very attractive. Firms, which are privately owned, see the opportunity of increased profits and produce the new fashionable and favoured products. Consumers will be willing to pay high prices for products they particularly desire. Thus, we can see that in a market economy consumers decide what is to be produced. Firms producing these goods will make more profits and this will persuade more firms to produce these particular goods rather than less favoured ones. Consumers are willing to spend more on products and services, which are favoured. They spend their wages on the products and services they need. Workers are paid wages by employers according to how skilled they are and how many firms wish to employ them. The system is based on private enterprise with private ownership of the means of production and private supplies of capi-tal, which can be defined as surplus income available for investment in new business activities. In a true market economy the government plays no role in the management of the economy, the government does not intervene in it.
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