Market economic system
| English | Chinese | Pinyin |
|---|---|---|
| market economic system | 市场经济体制 | shì chǎng jīng jì tǐ zhì |
| profit motive | 利润动机 | lì rùn dòng jī |
| efficiency | 效率 | xiào lǜ |
| innovation | 创新 | chuàng xīn |
| market failure | 市场失灵 | shì chǎng shī líng |
| inequality | 不平等 | bù píng děng |
| monopolies | 垄断 | lǒng duàn |
An economy run by prices alone
- Imagine no government in the marketplace at all — just buyers, sellers and prices deciding everything.
- That is the market economic system 市场经济体制, and it has real strengths and real flaws.
In a pure market economy, resources are allocated by:
Prices and profit coordinate decisions in a market system.
In a market economy, the ______ motive guides what firms produce.
Firms produce what is profitable, following consumer demand.
How it works
- Resources are privately owned; decisions are guided by prices and the profit motive 利润动机.
- The three questions — what, how, for whom — are answered by markets, not planners.
In a market economy, prices and the profit motive decide what is produced — buyers and sellers meet in a market
How a market allocates
In a market system, price moves to where demand meets supply — that price signal decides what gets made. Shift the curves and watch it settle.
A strength of the market system is:
The profit motive drives efficiency and innovation.
Strengths
- Efficiency 效率: firms cut costs and follow consumer wants to make profit.
- Choice and innovation 创新: competition rewards better, cheaper products.
Which are weaknesses of a pure market system? (Select all that apply.)
Choice is a strength; the others are weaknesses.
Most real economies are pure market systems with no government.
Real economies are mixed — the pure market system is only a model.
Weaknesses
- Market failure 市场失灵: some goods aren't provided (public goods), some harms ignored (pollution).
- Inequality 不平等: the poor may not afford essentials; monopolies 垄断 can exploit buyers.
No real economy is purely market. Even the freest economies have some government. The pure market system is a useful model, not a description of any actual country.
You've got it
- a market system allocates by prices and the profit motive, with private ownership
- strengths: efficiency, choice, innovation
- weaknesses: market failure and inequality — why governments step in