By: Cebrena coon & William Hansen & Kayla Serzynski
market economy is a realized social system based on the division of labor in which the prices of goods and services are determined in a free price system set by supply and demand.
Since free markets are governed by the law of supply and demand, the market itself will determine the price of goods and services, and this information will be made available to all participants. Businesses can decide which goods to produce and in what quantity, and consumers and businesses can decide what they want to purchase and at what price.
<ul><li>The opposite of a market economy is a planned economy, where the government decides what to produce, in what quantity, and to be sold at what price. Mixed economies blend market and planned economies, meaning that the government will have some role in regulating the market, but all other activity will be driven by the decisions of buyers and sellers. </li></ul>
<ul><li>Since the government will always have some level of regulatory control, no country operates as a free market in the strict sense of the word, but we generally say that market economies are those in which governments attempt to intervene as little as possible, while mixed economies include elements of both capitalism and socialism. </li></ul><ul><li>The main characteristics of a market economy are its flexibility and decentralized nature. This type of economic system is more apt to cope up with ever-changing market trends, making it faster and more </li></ul><ul><li>reactive. The role of the national and state governments in the market economy is debatable, although it has been found that government interventions are sometimes necessary. In these cases, the government mainly deals with the formation and implementation of rules and regulations and ensures that monopolistic behavior does not obstruct competition in the marketplace. </li></ul>
US Market Economy is basically structured with the principles of individual freedom. US Economy is the world largest economy over the world. Know more on the US Market Economy.
Most of the economies over the world have been following the principles of market oriented economy system. Economies such as India and China have attained highest economic success through the use of market-oriented principles.
Emerging market economy possesses the essential characteristic of trade liberalization and open policy frameworks. Find the list of emerging market economies over the world.
The main function of a stock exchange is to facilitate the transactions associated with both the buying and selling of securities. Buyers and sellers of shares and stocks can track the price changes of securities from the stock markets in which they operate. The ups and downs of stock indexes help the investors to speculate on the return on investment (ROI) of various investment options.
Stock exchanges also serve as a source of capital formation for listed companies. Business entities that are listed in a particular stock exchange can issue shares to the public and sell those shares in that market. To take part in these transactions, listed companies need to abide by the rules and requirements of that market. The stock exchanges protect the interests of both buyers and sellers by assuring a timely transfer of money. The participants of a stock market are required to operate within the specified transaction limits fixed by the regulatory authority of that stock market. Speed and transparency are vital for all stock market transactions. The companies listed in a stock exchange need to provide proper guidance regarding business performance and prospects, mergers and acquisitions, stock prices, dividends and other information at all times. Investors make their investment decisions based on the information obtained from these companies, and the comments of analysts who track those companies.
<ul><li>With the help of stockbrokers, the buyers and sellers participating in a stock market carry out their transactions. The brokers representing selling parties take their orders to the stock exchange floor and then find brokers representing parties willing to invest in similar stocks. If both parties agree to trade at the fixed price, the transaction takes place. </li></ul>
A planned economy is also sometimes called a command economy. The most important aspect of this type of economy is that all major decisions related to the production, distribution, commodity and service prices, are all made by the government. The planned economy is government directed, and market forces have very little say in such an economy. This type of economy lacks the kind of flexibility that is present a market economy, and because of this, the planned economy reacts slower to changes in consumer needs and fluctuating patterns of supply and demand. On the other hand, a planned economy aims at using all available resources for developing production instead of allotting the resources for advertising or marketing.
<ul><li>A mixed economy combines elements of both the planned and the market economies in one cohesive system. This means that certain features from both market and planned economic systems are taken to form this type of economy. This system prevails in many countries where neither the government nor the business entities control the economic activities of that country – both sectors play an important role in the economic decision-making of the country. In a mixed economy there is flexibility in some areas and government control in others. Mixed economies include both capitalist and socialist economic policies and often arise in societies that seek to balance a wide range of political and economic views. </li></ul>
Barbados, Jamaica and Trinidad will become the first countries to enter a Caribbean single market economy during a meeting on Feb. 19 in Guyana, reports AP (Dec. 31, 2004). Leaders from the three countries will officially establish the single market the same day the 15-member Caribbean Community
<ul><li>will inaugurate its new headquarters in Guyana's capital of Georgetown. The three countries are the only Caribbean Community members who have passed the necessary laws to join the EU-style single market, which will allow duty-free trade between participating nations. Other, smaller eastern Caribbean countries have agreed to join by end of 2005, while Haiti and Suriname are aiming to enter by 2008. The single market also allows recognized professionals to work in </li></ul>
Capitalism is a difficult, problematic term; it applies to a diversity of phenomenon spread across disparate historical cultures with substantially variable world views. However, the term is an Enlightenment European term used to describe European practices; so the term "capitalism" means more than just a body of social practices easily applied across geographical and historical distances, it is also a "way of thinking," and as a way of thinking does not necessarily apply to earlier European origins of capitalism or to capitalism as practiced in other cultures.
The earliest forms of capitalism—which we call "mercantilism"—originate in Rome, the Middle East, and the early Middle Ages. Mercantilism might be roughly defined as the distribution of goods in order to realize a profit. Goods are bought at one site for a certain price and moved to another site and sold at a higher price. As the Roman empire expanded, mercantilism correspondingly expanded. But the contraction of the Roman empire from the fifth century onwards also contracted mercantilism until, by the 700's, it was not a substantial aspect of European culture, that is, European economies tended to localize. Arabic cultures, on the other hand, had a long history of mercantilism, living as they did on the trade routes between three great empires: Egypt, Persia, and later Byzantium. As Islam from the seventh century A.D. onwards spread like wildfire across Northern Africa, Spain, the Middle East and Asia, Arabic mercantilism assumed an unprecedented global character. The medieval Europeans essentially learned mercantilism from their Islamic neighbors, evidenced in large part by the number of economic terms in European languages that are derived from Arabic, such as tariff and traffic. From the 1300's, Europeans would begin expanding their mercantile practices, resulting in a social mobility hitherto unseen in European culture as well as pushing Europeans, as it did the Muslims, to explore distant parts of the globe. The voyages of discovery were entirely driven by mercantile ambitions.
<ul><li> As time went on in Europe, mercantilism gradually evolved into economic practices that would eventually be called capitalism . Capitalism is based on the same principle as mercantilism: the large-scale realization of a profit by acquiring goods for lower prices than one sells them. But capitalism as a practice is characterized by the following: </li></ul>
The accumulation of the means of production (materials, land, tools) as property into a few hands; this accumulated property is called "capital" and the property-owners of these means of production are called "capitalists. Productive labor—the human work necessary to produce goods and distribute them—takes the form of wage labor. That is, humans work for wages rather than for product. One of the aspects of wage labor is that the laborer tends not to be invested in the product. Labor also becomes "efficient," that is, it becomes defined by its "productivity"; capitalism increases individual productivity through "the division of labor," which divides productive labor into its smallest components. The result of the division of labor is to lower the value (in terms of skill and wages) of the individual worker; this would create immense social problems in Europe and America in the nineteenth and twentieth centuries. "
The means of production and labor is manipulated by the capitalist using rational calculation in order to realize a profit. So that capitalism as an economic activity is fundamentally teleological. </TD< TR> General Glossary Economics Modernity Teleology Enlightenment Glossary Classical Mechanics Progress As a way of thinking, capitalism involves the following: Capitalism as a way of thinking is fundamentally individualistic, that is, that the individual is the center of capitalist endeavor. This idea draws on all the Enlightenment concepts of individuality: that all individuals are different, that society is composed of individuals who pursue their own interests, that individuals should be free to pursue their own interests (this, in capitalism, is called "economic freedom"), and that, in a democratic sense, individuals pursuing their own interests will guarantee the interests of society as a whole.
<ul><li>As a way of thinking, capitalism involves the following: Capitalism as a way of thinking is fundamentally individualistic, that is, that the individual is the center of capitalist endeavor. This idea draws on all the Enlightenment concepts of individuality: that all individuals are different, that society is composed of individuals who pursue their own interests, that individuals should be free to pursue their own interests (this, in capitalism, is called "economic freedom"), and that, in a democratic sense, individuals pursuing their own interests will guarantee the interests of society as a whole. Capitalism as a way of thinking is fundamentally based on the Enlightenment idea of progress; the large-scale social goal of unregulated capitalism is to produce wealth, that is, to make the national economy wealthier and more affluent than it normally would be. Therefore, in a concept derived whole-cloth from the idea of progress, the entire structure of capitalism as a way of thinking is built on the idea of "economic growth." This economic growth has no prescribed end; the purpose is for nations to grow steadily wealthier. Economics, the analysis of the production and distribution of goods, has to be abstracted out of other areas of knowledge. In other words, capitalism as a way of thinking divorces the production and distribution of goods from other concerns, such as politics, religion, ethics, etc., and treats production and distribution as independent human endeavors. In this view, the fundamental purpose and meaning of human life is productive labor. Marxism, which has more in common with capitalism than it has differences, also bases itself on these ideas. </li></ul>
Economics, the analysis of the production and distribution of goods, has to be abstracted out of other areas of knowledge. In other words, capitalism as a way of thinking divorces the production and distribution of goods from other concerns, such as politics, religion, ethics, etc., and treats production and distribution as independent human endeavors. In this view, the fundamental purpose and meaning of human life is productive labor. Marxism, which has more in common with capitalism than it has differences, also bases itself on these ideas. The economic world view treats the economy as if it were mechanical, that is, subject to certain predictable laws. This means that economic behavior can be rationally calculated , and these rational calculations are always future-directed . So, the mechanistic view of the economy leads to an exclusively teleological world picture; capitalism as a manipulation of the "machine" of the economy is always directed to the future and intentionally regards the past as of no concern. This, in part, is one of the fundamental origins of modernity, the sense that the cultural present is discontinuous with the past. The fundamental unit of meaning in capitalist and economic thought is the object , that is, capitalism relies on the creation of a consumer culture, a large segment of the population that is not producing most of what it is consuming. Since capitalism, like mercantilism, is fundamentally based on distributing goods—moving goods from one place to another—consumers have no social relation to the people who produce the goods they consume. In non-capitalist societies, such as tribal societies, people have real social relations to the producers of the goods they consume. But when people no longer have social relations with others who make the objects they consume, that means that the only relation they have is with the object itself. So part of capitalism as a way of thinking is that people become "consumers," that is, they define themselves by the objects they purchase rather than the objects they produce.
The right to private property (1) is the social-political principle that adult human beings may not be prohibited or prevented by anyone from acquiring, holding and trading (with willing parties) valued items not already owned by others. Such a right is, thus, unalienable and, if in fact justified, is supposed to enjoy respect and legal protection in a just human community.
In the development of classical liberalism there emerged in Western political thought a shift of focus as to the prime value in social-political matters, from the group--a tribe, class, state or nation--to the human individual. It started with the effort to gradually transfer power from a few or even one person as the source of collective authority and power to more segments of society involved in exercising such authority and power, leading, eventually, to the sovereignty of the human individual. The way in which power is diffused when individuals are sovereigns rather than groups is through the fact that individuals have only a little and highly diversified power to wield. In consequences, they aren't likely to impose themselves on others by, say, starting a war, even when they disagree very seriously. That, in essence, was the initial motivation for moving toward individualism, which, when implemented via law and public policy, is much more conducive to peace and, as a result, to prosperity than is any form of collectivism. Thus classical liberalism has had some considerable support on practical grounds--its usefulness to attaining various widely sought after objectives.
A major reason, however, that individualism makes better sense than its competitors is that the view that human beings are primarily parts of a social whole is wrong. This last is a false notion. When invoked, arguably it tends to serve as a disguise for certain special or vested privileges of some members of society. (2) Generalizing such special or vested interests, the values or goals pursued in their name, has been a major source of political acrimony throughout human history. It even continues to drive much of contemporary democratic politics.
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1. Decision Making and Cost-Benefit Analysis Standard 2 , Standard 14 , Standard 15 , Standard 17 2. Division of Labor and Specialization Standard 6 3. Economic Institutions Standard 10 4. Economic Systems Standard 3 , Standard 15 5. Incentives Standard 4 , Standard 15 , 6. Money Standard 11 7. Opportunity Cost Standard 1 , Standard 15 8. Productive Resources Standard 1 , Standard 6 , Standard 13 , Standard 15 9. Productivity Standard 15 10. Property Rights Standard 10 , Standard 16 11. Scarcity Standard 1 12. Technology Standard 15 13. Trade, Exchange and Interdependence Standard 5 , Standard 11 14. Aggregate Demand Standard 13 15. Aggregate Supply Standard 13 16. Budget Deficits and Public Debt Standard 16 , Standard 20 17. Business Cycles Standard 19 18. Economic Growth Standard 15 19. Employment and Unemployment Standard 6 , Standard 10 , Standard 18 , Standard 19 20. Fiscal Policy Standard 20 21. GDP Standard 16 , Standard 18 22. Inflation Standard 7 , Standard 8 , Standard 19 , Standard 20 23. Monetary Policy and the Federal Reserve Standard 11 , Standard 12 , Standard 20 24. Real vs. Nominal Standard 6 , Standard 7 , Standard 8 , Standard 12 , Standard 18 25. Competition and Market Structures Standard 3 , Standard 7 , Standard 8 , Standard 9 , Standard 16 , 26. Consumers Standard 1 27. Demand Standard 7 , Standard 8 , Standard 13 28. Elasticity of Demand Standard 8 (N.B. closest fit) 29. Entrepreneurs Standard 1 , Standard 14 , Standard 15 30. Government Failures/Public-Choice Analysis Standard 17 31. Income Distribution Standard 13 , Standard 15 , Standard 16 32. Market Failures Standard 8 , Standard 9 , Standard 16 33. Markets and Prices Standard 7 , Standard 8 , Standard 15 34. Price Ceilings and Floors Standard 7 , Standard 8 35. Producers Standard 1 36. Profit Standard 2 , Standard 14 37. Roles of Government Standard 14 , Standard 16 38. Supply Standard 3 , Standard 7 , Standard 8
39. Balance of Trade and Balance of Payments Standard 5 40. Barriers to Trade Standard 5 , Standard 17 41. Benefits of Trade/Comparative Advantage Standard 5 , Standard 6 42. Economic Development Standard 6 (N.B. closest fit) 43. Foreign Currency Markets/Exchange Rates Standard 5 , Standard 7 , Standard 8 Personal Finance Economics 44. Compound Interest Standard 10 , Standard 12 , Standard 15 45. Credit Standard 10 46. Financial Markets Standard 15 47. Human Capital Standard 1 , Standard 15 48. Insurance Standard 15 49. Money Management/Budgeting Standard 11 50. Risk and Return Standard 12 , Standard 14 , Standard 15 51. Saving and Investing Standard 12, Standard 15