Features of market economy



1. No governmental intervention:

In market economy, government is facilitator not doer. It does not make the investment. It does not decide about Production, utilization of resources, determination of prices, employment, distribution of benefits etc. there is personal freedom to the people and business organization

2. Market led:

The economy is led by market. Production, utilization of resources, pricing, employment level etc are according to market demand and supply of goods and services. Only the goods demanded are produced. Wage and employment level too are determined by demand and supply of labor. Rent and interest rate are determined by demand and supply of land and capital respectively.

3. Consumer’s sovereignty:

In market economy, consumers are sovereign. The goods and services are produced as per the wants, needs and preferences of the consumers. The producer cannot put pressure on the consumers to purchase their goods. The resources are allocated according to consumer’s choices.

4. Personal freedom and motives:

Since there is no governmental intervention in the activities of people and business organizations, each of them has freedom to choose occupations, subject of interest and way of life. Each of them performs activities according to their own motives. The government just facilitates them.

5. Personal property:

The people and business organization have their own properties. They may or may not be ceilings if holding assets.

6. Perfect competition:

Each industry has large number of firms producing similar or homogenous goods. There is competition between them on the basis of prices, quantities, and qualities. According to classical economists, perfect competition exists in market economy.