Have you ever walked through a busy street mark..


The market economy is sometimes called the free market. In a free market, the only reason why things are bought and sold is because there is a demand for them. Prices for goods and services are simply what people are prepared to pay. The market economy is not really controlled by anyone. It controls itself.
In the wider economy, we are all customers, and the stall owners are like companies.
The role of the company in the free market is to supply what people want. However, companies need an incentive. The incentive is profit. There are two ways for companies to make a profit. The first way is to raise their prices. The second way is to reduce then production costs. And this brings us to two more features of the market economy: competition and technology.
Competition exists in a free market because, theoretically, anyone can be a producer. Competition is good for consumers because it helps to control prices and quality.
Technology is the use of tools and machines to do jobs in a better way. This helps companies produce more goods in less time and with less effort. The result: more profit.
At the macroeconomic level, a truly free market economy does not exist anywhere in the world. Nevertheless, many of the features of the market economy do exist in most societies today.

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