"Have you ever wondered how prices of
goods and services change so
frequently?
Why do some businesses thrive while
others shut down?
WHOA!
This could be the part of the presentation
where you can introduce yourself, write
your email...
What
is
Market Economic System
(or market economy)?
Market Economic System (or market economy)
is an economic system where decisions about:
1. Production
2. Distribution,
3. and Pricing
of goods and services are driven by the interactions of individuals and
businesses in a free market. It is characterized by supply and demand,
private ownership, and minimal government intervention.
Circular flow of Economy in Market System
SERVICES
Here you can Here you can Here you can
describe the topic of describe the topic of describe the topic of
the section the section the section
Graph on the Left (Air Fares)
1. The demand for air travel increases, shifting the demand curve
from D to D₁.
2. This leads to a higher equilibrium price (P to P₁) and a higher quantity
of air travel (Q to Q₁)
3. The supply curve remains constant, meaning suppliers are
responding to the increased demand by selling more at a higher
price.
Graph on the Right (Sea Fares)
1. The demand for sea travel decreases, shifting the demand curve from
D to D₁.
2. This leads to a lower equilibrium price (P to P₁) and a lower quantity of sea
travel (Q to Q₁).
3. Again, the supply remains unchanged, meaning fewer people are willing to
purchase sea travel services..
The use of resources is changing all the time in response to changes in
consumer demand and the costs of production.
Resources move towards those products whose demand is rising and
away from those which are becoming less popular.
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HERE!
The changes in demand cause prices to change. These
alterations in price encourage firms to switch their
resources from sea travel to air travel
"A market economy operates on the principle of
demand and supply.
When demand for a product increases, its price rises.
As a result, producers shift resources to produce
more of that high-demand product.
Similarly, when demand falls, prices drop,
discouraging production. This natural movement of
resources ensures that the economy adapts to
consumer needs.
The Importance of Competition
and Incentives
MAYBE YOU NEED TO
DIVIDE THE CONTENT
Consumers have choice to buy
any products and services
VS. PLANNED / COMMAND ECONOMY
Consumers/ Producers don’t a
have choice in buying or
producing products and services
MAYBE YOU NEED TO
DIVIDE THE CONTENT
Competition
result in low
price.
A PICTURE
IS WORTH A
THOUSAND
WORDS
A PICTURE
IS WORTH A
THOUSAND
WORDS
A PICTURE
REINFORCES
THE CONCEPT
Images reveal large
amounts of data, so
remember: use an image
instead of long texts
Private and Public
Sectors
When you buy a car to a car dealer, the car dealer is come
from what sector?
Because key words are great for catching
your audience’s attention
The private sector consists of businesses and organizations
owned by individuals or companies.
These businesses operate for profit, meaning they aim to
make money by responding to market forces such as supply
and demand. Examples include local grocery stores,
multinational corporations like Apple, and small startups.
Because key words are great for catching
your audience’s attention
AWESOME WORDS
The public sector is controlled by the government.
It focuses on providing essential services like healthcare, education,
public transport, and law enforcement—areas where private
companies might not operate efficiently.
Some public enterprises are known as state-owned enterprises (SOEs),
such as nationalized industries or government-run utilities
1. A market economic system should be very
responsive to changes in consumer demand. In
fact, in this economic system, consumers are
said to be sovereign. This means that it is
consumers who have the power to determine
what is produced.
Suppose a growing number of consumers
become
health-conscious and start demanding
plant-based alternatives to traditional meat
products.
In response, food companies notice the trend and begin
producing more plant-based burgers, tofu, and
other vegan-friendly products. Some fast-food chains even add
plant-based options to their menus.
Over time, as consumer demand continues to rise, more
businesses enter the market, leading to greater competition
and innovation. This results in lower prices, better-quality
products, and a wider variety of options for consumers.
2. Resources should change automatically and quickly to reflect
changes in consumer demand.
This is for three reasons:
1. The price mechanism in a market economic system
provides information on which products are increasing in demand and
which ones are falling in demand.
2. The market economic system provides an incentive for resources to
move in response to changes in demand.
Example, If demand for books is increasing, whilst the demand for
cinema tickets is falling, profits and wages will be rising in the
publishing industry, while they will be falling in the film industry.
3. The market economic system punishes those firms, workers and
owners of capital and land who do not respond to changing demand.
Resources should change automatically and quickly to reflect
changes in consumer demand.
This is for three reasons:
1. The price mechanism in a market economic system
provides information on which products are increasing in
demand and which ones are falling in demand.
2. The market economic system provides an incentive for
resources to move in response to changes in demand.
Example, If demand for books is increasing, whilst the demand
for cinema tickets is falling, profits and wages will be rising in
the publishing industry, while they will be falling in the film
industry.
3. The market economic system punishes those firms, workers
and owners of capital and land who do not respond to
changing demand.
3. There is choice. Consumers can choose which products to
buy and which firms to buy from. Firms can also decide what
they want to produce and workers can choose who to work
for.
4. Costs and prices may be low. The profit motive and competition promote
eff iciency. Those firms which produce at the lowest costs, and so which are
able to charge the lowest prices, are likely to sell more and earn more profit.
In contrast, those firms which produce products of the same quality at a
higher price are likely to go out of business. Indeed, by rewarding eff
iciency, and punishing ineff iciency, the market economic system should
encourage the production of the goods and services that consumers want
and are prepared to pay for, in the right quantities and at the lowest
possible cost per unit.
5. Quality may be high. Market forces can promote the
improvement of methods of production and a rise in the
quality of products made. It does this by putting
competitive pressure on firms, and by providing them
with the profit incentive to try to gain more sales by
making their products more attractive to consumers.
Conclusion:
"In a market economy, prices guide businesses and
consumers. When demand increases, prices rise,
encouraging more production.
When demand falls, prices drop, discouraging production.
Competition keeps the market efficient, ensuring
businesses stay innovative and responsive to consumer
needs.
