Knowra Market economy Market economy An economic system in which production and distribution are coordinated mainly through prices and voluntary exchange in markets. Its institutions can range from lightly regulated to heavily regulated.
Supply and demand : The relationship between the quantity of a good people want and the quantity producers offer at different prices. Their interaction helps form the prices that guide production and purchasing.
Command economy : An economic system in which central authorities direct major production and allocation decisions. It replaces much decentralized market coordination with administrative direction.
Antitrust law : Laws intended to limit anticompetitive conduct and preserve competition in markets. It addresses market power that can undermine competitive exchange.
Economic efficiency : A condition in which resources are allocated with minimal waste relative to specified goals. Market prices can help coordinate resources, though efficiency depends on assumptions and institutions.
Adam Smith : An eighteenth-century Scottish political economist whose work examined commercial society and the division of labor. His account of self-interest and exchange became closely associated with market coordination.
Price mechanism : The process by which prices convey information and incentives that influence economic decisions. It is the market economy’s main coordination channel.
Mixed economy : An economic system combining markets with government provision, regulation, or ownership. It describes economies where markets operate alongside substantial public coordination.
Consumer protection : Laws and practices that guard consumers against unsafe products, fraud, and unfair transactions. Market exchange is governed by rules intended to protect buyers.
Income inequality : The uneven distribution of income among people or households. Market outcomes distribute earnings unevenly according to assets, skills, and bargaining conditions.
The Wealth of Nations : Adam Smith’s 1776 work analyzing production, trade, economic growth, and political economy. It offered an influential account of how markets and specialization can organize production.
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