Market economy - Revision history

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	[[File:Market Economy- Wealth of Nations.jpg\|300px\|thumb\|right\|Figure 1. An Inquiry into the Nature and Causes of the Wealth of Nations (The Wealth of Nations in short form) by Adam Smith, it is the seminal work regarding free market economics, published in 1776.<ref>Wikimedia Commons, [Online], Available: https://commons.wikimedia.org/wiki/File:Wealth_of_Nations_title_RZ.jpg [June 22, 2016] </ref>]]		[[File:Market Economy- Wealth of Nations.jpg\|300px\|thumb\|right\|Figure 1. An Inquiry into the Nature and Causes of the Wealth of Nations (The Wealth of Nations in short form) by Adam Smith, it is the seminal work regarding free market economics, published in 1776.<ref>Wikimedia Commons, [Online], Available: https://commons.wikimedia.org/wiki/File:Wealth_of_Nations_title_RZ.jpg [June 22, 2016] </ref>]]

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	==Effects of a Free Market==		==Effects of a Free Market==
	Market economies are not ‘perfect’ however~~; absent~~ of government regulation certain [[market structure]]s ~~can~~ emerge and change the way a market operates. There a number of ways in which a free market can produce inefficient outcomes or undesirable market structures such as [[externality \| externalities]], [[Monopoly \| monopolies]], [[oligopoly \| oligopolies]] and others. These structures can distort prices by restricting supply or demand.<ref>A. B. Abel, et al. Macroeconomics, 6th ed. Toronto, Canada: Pearson, 2011, pp. 216.</ref> The under-supply and imperfect [[price standardization]] in a market creates a [[deadweight loss]] in the economy which is [[market efficiency \| inefficiencies]] in the market and can have negative effects.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 373-374</ref>. Free markets are inherently prone to an unequal distribution of wealth in the economy, this is often measured using the [[Gini coefficient]].<ref>P. A. Rogerson. "Gini Coefficient of Inequality: A New Interpretation". ''Letters in Spatial and Resource Sciences'', 6. pp 109, August, 2013.</ref>		Market economies are not ‘perfect’, however, the absence of government regulation allows certain [[market structure]]s to emerge and change the way a market operates. There a number of ways in which a free market can produce inefficient outcomes or undesirable market structures such as [[externality \| externalities]], [[Monopoly \| monopolies]], [[oligopoly \| oligopolies]] and others. These structures can distort prices by restricting supply or demand.<ref>A. B. Abel, et al. Macroeconomics, 6th ed. Toronto, Canada: Pearson, 2011, pp. 216.</ref> The under-supply and imperfect [[price standardization]] in a market creates a [[deadweight loss]] in the economy which causes [[market efficiency \| inefficiencies]] in the market and can have negative effects.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 373-374</ref> Free markets are inherently prone to an unequal distribution of wealth in the economy, this is often measured using the [[Gini coefficient]].<ref>P. A. Rogerson. "Gini Coefficient of Inequality: A New Interpretation". ''Letters in Spatial and Resource Sciences'', 6. pp 109, August, 2013.</ref>

	A market economy can produce [[externality \| externalities]]. Externalities are effects experienced by third parties as a result of economic activity.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 645.</ref> These effects can be either negative such as [[pollution]] from burning [[coal]] for [[electricity]] or positive such as the implementation of higher safety regulations at [[nuclear power plant]]s. A negative externality occurs when the [[cost \| social cost]] is greater than the [[cost \| production cost]] or [[cost \| private cost]]. This means that the parties creating the externality do not take into account the negative effects of their actions. If [[coal-fired power plant]]s do not employ equipment to reduce the harmful effects of [[emissions]] then there is a greater social cost as emissions can affect the health of those living close to the plant.		A market economy can produce [[externality \| externalities]]. Externalities are effects experienced by third parties as a result of economic activity.<ref name = Goolsbee>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 645.</ref> These effects can be either negative such as [[pollution]] from burning [[coal]] for [[electricity]], or positive such as the implementation of higher safety regulations at [[nuclear power plant]]s. A negative externality occurs when the [[cost \| social cost]] is greater than the [[cost \| production cost]] or [[cost \| private cost]]. This means that the parties creating the externality do not take into account the negative effects of their actions. If [[coal-fired power plant]]s do not employ equipment to reduce the harmful effects of [[emissions]] then there is a greater social cost as emissions can affect the health of those living close to the plant.

	A positive externality occurs when the [[cost \| social cost]] is less than the [[cost \| private cost]] thus creating a potential gain in welfare or an increase in social good.<ref~~>A.~~ Goolsbee~~, S. Levitt and C. Syverson. ‘’Microeconomics’', pp. 645.<~~/~~ref~~> There are ways in which a free market can compensate for negative externalities created by its unregulated activities without government intervention or the implementation of regulation. These are called '''market solutions''' One such way is the [[Coase theorem]] which suggests that if there is a desire to correct a negative effect they experience, they can incentivize or compensate the party creating the effect to stop a certain activity or introduce another. The population living around a coal plant (perhaps the municipal government) could pay the ~~pant~~ to implement the new technology in order to reduce the negative effects caused by its emissions.		A positive externality occurs when the [[cost \| social cost]] is less than the [[cost \| private cost]] thus creating a potential gain in welfare or an increase in social good.<ref name = Goolsbee/> There are ways in which a free market can compensate for negative externalities created by its unregulated activities without government intervention or the implementation of regulation. These are called '''market solutions.''' One such way is the [[Coase theorem]] which suggests that if there is a desire to correct a negative effect they experience, they can incentivize or compensate the party creating the effect to stop a certain activity or introduce another. The population living around a coal plant (perhaps the municipal government) could pay the plant to implement the new technology in order to reduce the negative effects caused by its emissions.

			==For Further Reading==
			*[[Market force]]
			*[[Market power]]
			*[[Market failure]]
			*[[Externality]]
			*Or explore a [[Special:Random\|random page]]

	==References==		==References==
	{{reflist}}		{{reflist}}
			[[Category: Uploaded]]

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	[[File:Market Economy- Wealth of Nations.jpg\|300px\|thumb\|right\|Figure 1. An Inquiry into the Nature and Causes of the Wealth of Nations (The Wealth of Nations in short form) by Adam Smith, it is the seminal work regarding free market economics, published in 1776.<ref>Wikimedia Commons, [Online], Available: https://commons.wikimedia.org/wiki/File:Wealth_of_Nations_title_RZ.jpg [June 22, 2016] </ref>]]		[[File:Market Economy- Wealth of Nations.jpg\|300px\|thumb\|right\|Figure 1. An Inquiry into the Nature and Causes of the Wealth of Nations (The Wealth of Nations in short form) by Adam Smith, it is the seminal work regarding free market economics, published in 1776.<ref>Wikimedia Commons, [Online], Available: https://commons.wikimedia.org/wiki/File:Wealth_of_Nations_title_RZ.jpg [June 22, 2016] </ref>]]

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	==Market Economy==		==Market Economy==
	<onlyinclude>A [[market economy]] or '''free market''' is a market that is unrestricted by [[regulation]] and the economy is therefore subject to the market forces.</onlyinclude> The free market is an economic structure pioneered by Adam Smith in his work, ''The Wealth of Nations''. The model is driven by supply and demand where there is [[perfect competition]], buyers and sellers may transact as they please and government regulations do not obstruct or control the transactions. Taxation and other government regulations can disrupt this free exchange and sometimes disrupt the [[Market equilibrium \| equilibrium]] creating inefficiencies.<ref>J.Black, N. Hashimzade, and G. Myles. (2009) ‘’A Dictionary of Economics’’, 3rd ed. [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-1283?rskey=RlGbO9&result=1</ref> In a free market, instead of governments making economic decisions it is the interactions between buyers and sellers which determine the direction of the market.<ref~~>Investopedia. "Market Economy." [Online], Available:http:~~/~~/www.investopedia.com/terms/m/marketeconomy.asp[June 20, 2016].</ref~~>		<onlyinclude>A [[market economy]] or '''free market''' is a market that is unrestricted by [[regulation]] and the economy is therefore subject to the market forces.</onlyinclude> The free market is an economic structure pioneered by Adam Smith in his work, ''The Wealth of Nations''. The model is driven by supply and demand where there is [[perfect competition]], buyers and sellers may transact as they please and government regulations do not obstruct or control the transactions. Taxation and other government regulations can disrupt this free exchange and sometimes disrupt the [[Market equilibrium \| equilibrium]] creating inefficiencies.<ref name = Oxf>J.Black, N. Hashimzade, and G. Myles. (2009) ‘’A Dictionary of Economics’’, 3rd ed. [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-1283?rskey=RlGbO9&result=1</ref> In a free market, instead of governments making economic decisions it is the interactions between buyers and sellers which determine the direction of the market.<ref name=Oxf/>

	==Effects of a Free Market==		==Effects of a Free Market==

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[[Category:Done 2016-04-30]]
[[File:Market Economy- Wealth of Nations.jpg|300px|thumb|right|Figure 1. An Inquiry into the Nature and Causes of the Wealth of Nations (The Wealth of Nations in short form) by Adam Smith, it is the seminal work regarding free market economics, published in 1776.<ref>Wikimedia Commons, [Online], Available: https://commons.wikimedia.org/wiki/File:Wealth_of_Nations_title_RZ.jpg [June 22, 2016] </ref>]]

A '''market''' is a medium which facilitates the exchange of goods and services between buyers and sellers. A market can be physical or virtual and is defined by the different [[goods and services]] exchanged in it.</onlyinclude><ref>D. Rutherford. ‘’Routlege Dictionary of Economics’’. London: Routlege, 1995, pp. 286.</ref> A market facilitates the transactions between two or more parties who exchange goods and services, (most often) [[Currency | money]], information, or anything of value to the selling party. The interaction of buyers and sellers in the market determines the [[supply]] and [[demand]] of the goods and services being exchanged and therefore the [[market value | price]] and quality of the goods is also determined.

==Market Economy==
<onlyinclude>A [[market economy]] or '''free market''' is a market that is unrestricted by [[regulation]] and the economy is therefore subject to the market forces.</onlyinclude> The free market is an economic structure pioneered by Adam Smith in his work, ''The Wealth of Nations''. The model is driven by supply and demand where there is [[perfect competition]], buyers and sellers may transact as they please and government regulations do not obstruct or control the transactions. Taxation and other government regulations can disrupt this free exchange and sometimes disrupt the [[Market equilibrium | equilibrium]] creating inefficiencies.<ref>J.Black, N. Hashimzade, and G. Myles. (2009) ‘’A Dictionary of Economics’’, 3rd ed. [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-1283?rskey=RlGbO9&result=1</ref> In a free market, instead of governments making economic decisions it is the interactions between buyers and sellers which determine the direction of the market.<ref>Investopedia. "Market Economy." [Online], Available:http://www.investopedia.com/terms/m/marketeconomy.asp[June 20, 2016].</ref>

==Effects of a Free Market==
Market economies are not ‘perfect’ however; absent of government regulation certain [[market structure]]s can emerge and change the way a market operates. There a number of ways in which a free market can produce inefficient outcomes or undesirable market structures such as [[externality | externalities]], [[Monopoly | monopolies]], [[oligopoly | oligopolies]] and others. These structures can distort prices by restricting supply or demand.<ref>A. B. Abel, et al. Macroeconomics, 6th ed. Toronto, Canada: Pearson, 2011, pp. 216.</ref> The under-supply and imperfect [[price standardization]] in a market creates a [[deadweight loss]] in the economy which is [[market efficiency | inefficiencies]] in the market and can have negative effects.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 373-374</ref>. Free markets are inherently prone to an unequal distribution of wealth in the economy, this is often measured using the [[Gini coefficient]].<ref>P. A. Rogerson. "Gini Coefficient of Inequality: A New Interpretation". ''Letters in Spatial and Resource Sciences'', 6. pp 109, August, 2013.</ref>

A market economy can produce [[externality | externalities]]. Externalities are effects experienced by third parties as a result of economic activity.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 645.</ref> These effects can be either negative such as [[pollution]] from burning [[coal]] for [[electricity]] or positive such as the implementation of higher safety regulations at [[nuclear power plant]]s. A negative externality occurs when the [[cost | social cost]] is greater than the [[cost | production cost]] or [[cost | private cost]]. This means that the parties creating the externality do not take into account the negative effects of their actions. If [[coal-fired power plant]]s do not employ equipment to reduce the harmful effects of [[emissions]] then there is a greater social cost as emissions can affect the health of those living close to the plant.

A positive externality occurs when the [[cost | social cost]] is less than the [[cost | private cost]] thus creating a potential gain in welfare or an increase in social good.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’', pp. 645.</ref> There are ways in which a free market can compensate for negative externalities created by its unregulated activities without government intervention or the implementation of regulation. These are called '''market solutions''' One such way is the [[Coase theorem]] which suggests that if there is a desire to correct a negative effect they experience, they can incentivize or compensate the party creating the effect to stop a certain activity or introduce another. The population living around a coal plant (perhaps the municipal government) could pay the pant to implement the new technology in order to reduce the negative effects caused by its emissions.

==References==
{{reflist}}