Answer to Question #225555 in Economics of Enterprise for Max

Question

Explain how resources are allocated in a market system

Answer 1

How resources are allocated in a market system

The interplay of free and self-directed market forces is the key. They are distributed based on a pricing system that adapts to supply and demand. There are significant incentives to create, be efficient, react to what consumers want, adjust to real-world situations, compete with other buyers and sellers, learn from mistakes, develop new talents, innovate, not discriminate, find a way to be valuable to society, and many other things. While good ideas tend to proliferate, poor ones tend to die out.

A market economy isn't flawless, but any waste is an ideal chance for someone to step in and improve things while making a good profit. Although criticism is widespread, people who express it are rarely prepared to put their money where their mouth is.

Those who support socialism sometimes appear to lack a fundamental understanding of economics and believe in conspiracy theories involving large, strong corporations or the harmful impacts of greed. Buyers will generally buy from the lowest supplier, thus prices aren't affected by greed. To beat his competitors, the genuinely greedy vendor will decrease his pricing. This benefits customers rather than harming them. Is Walmart opportunistic? If that's the case, greater greed is desirable since it helps so many eager customers and employs so many others.