Answer to Question #108858 in Economics for vignesh

Question

Discuss to which extend a market system is beneficial to Mauritius.[8]

Answer 1

A market system or economy is when the economic decisions such as prices and quantity of goods produced are dictated by the market forces of demand and supply. Therefore, demand and supply determine the rate of economic growth.

For Mauritius, adopting a market system can help spar its economic growth. There are several benefits the country can reap from a market system such as;

Increased business efficiency. The government has little to do in terms of regulating transactions in an economy. Thus, it gives a chances for businesses to enhance their efficiency in production and that leads to increased competition. With competition, businesses will try as much as they can to minimize costs so that they get high profits from sales and remain afloat.

Also, a market system enhances productivity. People need money to acquire goods and services to satisfy their demands. This in itself is a motivation for workers to put more efforts in their jobs to earn more money to afford a decent living. The end result is increased productivity and output for the economy.

There is increased innovation in the economy. Innovation brings about new products in the market and also better technologies that can increase production efficiency. Due to competition and the need to make high profits, firms in a market system will be innovative in all ways to outdo one another. This results in improvement of the economy in the long run.