Title: What Is a Pure Market Economy? (with picture)
Headings: What Is a Pure Market Economy?
What Is a Pure Market Economy?
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Peter Hann
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Content: The factors of production — such as land, capital and labor — are sold by the people to firms in this type of economy. There is no participation by the government in this because the government does not own any of the factors of production. There is a pure market for labor, without government regulation on wages or intervention in bargaining between workers and firms over the price of their labor. The capital and land are all privately owned, so rents and interest rates are set by the pricing mechanism of supply and demand without government regulation. The market for goods and services consists of consumers paying firms for their products, making rational economic decisions to buy the best products, and thereby ensuring that the most efficient firms make the most profit for their products. A pure market economy requires a system of money that enables prices to be set by supply and demand and to move freely up and down, avoiding the inefficiency of a bartering system. The pricing mechanism ensures that the factors of production are used in the most effective way and that there is an efficient allocation of resources within the economy. The market is competitive because there are a large number of buyers and sellers, and no firm is in a monopoly position from which it could set prices outside the normal market mechanism. Neither is there any chance of an oligopoly in which a few firms might collude to set prices between them to keep the prices artificially high. Is Amazon actually giving you the best price?