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Summary: The Market Economy

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The Market Economy
Karl Max was of the notion that, the market economy is a transitional economic system, evolving from communism to socialism. This classifies the market economy as a necessary step in human development, one in which all economies should pass through to get to an upper range on the development path (Prychitko, 2002). Means of production are privatised and supply and demand, rather than government intervention are the regulators of the economy (Grigg, n.d.). This economic system depends on the idea that individuals will act in their best interests, so manufacturers will charge the highest prices possible to maximise their profits, while consumers will actively seek out the best quality for the lowest possible price (Metcalf, …show more content…

Demand and supply determines what products are produced and sets the prices these products are sold. The idea is that if prices get too high, then demand is low and so the market corrects itself by lowering prices. Companies have individual say concerning what product or service to provide based on their costs. The government’s participation in the economy is entirely neutral, it does not protect industry from domestic or foreign market pressures nor does it have economic interests in industry or offer subsidies to businesses or R&D (Zuckerman, …show more content…

The country has very few restrictions on investments and enforces no tariffs, however, there is a strong government intervention in macroeconomic management and major sectors like land, labour and capital resources. Both the government and the free market have a high degree of influence (Content, 2010). According to EconomyWatch (2010), Singapore has one of the most open and competitive economies in the world and ranked second on the World Bank Ease of doing Business Index in 2017. The unique combination of the free market system and government intervention developed in Singapore and dubbed the “Singapore Model”, has been highly successful and has seen the country attaining an AAA credit rating from all three major rating agencies, Standard & Poor’s, Moody’s and Fitch (Content,

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