Fundamental of Market Economy is:
- Private Property
- Everyone is free to own and use private property.
- Specialization
- Able to concentrate their efforts in areas where they have an advantage.
- Consumer Sovereignty
- Buyers decide what is acceptable by deciding what to buy and what not to buy.
- Competition
- Sellers are free to attempt to get the business of others by offering the best deal.
- Voluntary Exchange
- a win-win situation
- Limited Government Involvement
- Buyers and sellers must be free to operate with minimal government intervention.
Also we talked about free enterprise system: which is the same concept as the market economy, and circular, and the circular flow model:which shows us movement of goods, money, and services.
Today I want to more about circular flow model. I like circular flow model because it can shows us What process goods -- that we buy -- goes through and what process money -- that we spend -- goes through. I think to understand the circular flow model is very important in order to know more about economy. Also, in the circular flow model, nothing can be missed. To keep circle (economy) flow, we need all four Household, Factors of Product, Business, and Market.
Because we keep this process in balance, our market economy still work in today's economy.
Do you think market economy can exist without circular flow model? -- my answer is no.
What do you think?
Next week, we gonna study more about circular flow model. This time, government will also join in the model and model will be more complex. So be ready everyone!
I definitely agree with you that the circular flow model is extremely important to our economy! Without it, it would be more difficult to understand exactly how the products and our resources are correlated and one of them affects the other. And, without the circular flow model, we wouldn't be able to understand how new products come and go with our new available resources. Thanks for your insight! :)
ReplyDeleteI too think that the circular flow model is essential to understanding our economy. I liked that you mentioned that nothing gets missed in the model. It's called a circular "flow" model. In order to keep the model in motion the houses, businesses, products and factors of production must be included. Without them, the model wouldn't work or make sense. I also agree with you that without the model, our market economy would cease to exist.
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