, Layout Artist @La Salle University - Tingog Campus Press Organization | WMSU Instructor | ZSSPAA Inc. Division Journalism Facilitator
at WESTERN MINDANAO STATE UNIVERSITY, MOLAVE VOCATIONAL TECHNICAL SCHOOL, DIVISION OF ZAMBOANGA DEL SUR
Both markets and command economies have their roots in an earlier age. Centuries ago, government councils or town guuilds directed much economic activity in regions of Europe and Asia.
Scottish moral philosopher, father of modern economics who is still among the most influential thinkers in the field of economics today.
Around the time of the American Revolution (where people began to use machines), governments began to exercise less and less direct control over prices and economic conditions
. Feudal relationship gradually gave way to markets…or what is sometimes called
Trend culminated in the nineteenth century. The age of Laissez-faire. Abstention by governments from interfering in the workings of the free market…governments just let things take their own course.
In the 1980’s, the tides shifted yet again. Conservative economic policies reduced government control of the economy in the market economies.
What exactly is a market economy? How does government sometimes displace the market?
The time has come to understand the principles that lie behind the market economy and to review government’s role in economic life.
In a country like the United States, most economic questions are resolved through the market, so we begin our systematic study there.
you may be surprizec that….Instead, millions of businesses and consumers engage in voluntary trade, their actions and purposes are invisibly coordinated by a system of prices and markets.
To see how remarkable this fact is…Consider the city of New York, without constant flow of goods into and out of the City, New Yorkers would be on the verge of starvation within a week.
How is it that 10 million people can sleep easily at night, without living in mortal terror of a breaking down in the elaborate economic processes upon which the city’s existence depends?
Thousands of commodities are produced by millions of people, willingly, without central direction or master plan.
Without central intelligence or computation, it solves a problem that the largest super computer could not solve today, involving million of unknown variable and relations. Nobody designed the market, yet it functions remarkably well.
How does a market function? Exactly how does the market mechanism go about determining prices, wages, and outputs? A mechanism by which buyers and sellers meet to exchange things. In a market system, everything has a price, which is the value of the good in terms of money. Markets may be centralized…
At every moment, innumerable factors affect economic activity. Some people are buying while others are selling; firms are inventing new products while govts are passing laws to regulate pollution. Markets are constantly solving the what, how and for whom. As they balance all the forces operating on the economy, markets are finding an equilibrium of supply and demand.
When the supply and demand curve intersect, the market is in equilibrium. It represents balance among all the different buyers and sellers. Too high a price would mean a glut of goods with too much output, too low a price would produce long lines in stores and a deficiency of goods.
I would like to acknowledge my co reporter, Ms. Saily Sumogat who will tackle about How a market solves the three economic problems.
Markets and Government in a Market Economy
MARKETS AND GOVERNMENT IN A
Every individual endeavors to
employ his capital so that its produce
may be of greatest value. He generally
neither intends to promote the public
interest, nor knows how much he is
promoting it. He intends only his own
security, only his own gain. And he is in
this led by an invisible hand to promote
an end which was no part of his
intention. By pursuing his own interest
he frequently promotes that of society
more effectually than when he really
intends to promote it.
- The Wealth of Nations
The Industrial Revolution modernized the United
States and Canada during the 19th century.
•An economic system in which
private business operates in
competition and largely free of
• Sometimes called, “competitive
“Less regulation and lower taxes mean greater freedom”
“leave as alone”
should interfere as
little as possible in
decisions to the
An economy in which decisions
regarding investment, production, and
distribution are based on market
determined supply and demand, and
prices of goods and services are
determined in a free price system.
Who solves the
three basic questions?
is responsible for
problems in a
Economic Activities are
coordinated without coercion or
centralized direction by
anybody through the market.
Is an elaborate mechanism for the
unconscious coordination of people, activities,
and businesses through a system of prices and
It is a communication device for pooling the
knowledge and actions of millions of diverse
THE MARKET MECHANISM
- where goods are bought and
- is a mechanism by which
buyers and sellers of a
commodity interact to
determine its price and
- As for stocks, bonds
- As for houses or used
cars., may even be
Economic miracle = result of a smoothly
running economic mechanism
Equilibriumof Supplyand Demand
WHAT? HOW? FOR WHOM?
This is where the
quantity demanded and
quantity supplied are equal.
The corresponding price
is the equilibrium price or
market-clearing price, the
quantity is the equilibrium