Market economy is an economy in which prices are set by the demand and supply of a particular commodity or service (Campbell & Stanley, 2005). In such an economy there is not government intervention and it is also known as free…
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ple believe that market system can help in creating a positive investment climate because the society as a whole decides upon what they want to pay for a particular good and services. This decision cannot be influenced by any other force except buyers and sellers. The idea is that the buyers and sellers will work out the price and this price will be just. Because it is set by the people everyone will be happy. Also firms will try to avail the opportunity to earn profits and will come and invest. They will supply what they think people will demand and everyone in the society will benefit or in other words investment climate will improve.
Market system is also supported by many due to the increased competition between firms. When many firms are operating and there are no major subsidies or restrictions laid down by the government then all firms have equal opportunity to excel. This brings all the firms on the same level and then innovation increases as the firms want to do better than the other firms. As a result consumers get a variety of products and monopoly of suppliers is hindered. This also improves the investment climate of a country.
If a firm comes up with a great idea then it temporarily enjoys abnormal profits. But because there are no trade barriers other companies also try to replicate the same idea and the profits of the first firm come back to normal. This is how market system encourages a positive investment climate. The interests of the firms, the consumers and the society as a whole are preserved and this is why many people think market system as the best mechanism for allocating scarce resources.
In a market system of economy people’s need are catered well. Firms supply product or services if the buyers demand a particular product or services. Also people spend money on things they think will improve their life style so they are more contended.
People also believe that resources are distributed evenly in a market economy. This is because
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There is a reduction in growth rate as experienced in other developing countries for example 3.2%-2.6% rates in Kenya during the same period. Like other developing country, its population has doubled since 1990 due to the high population growth rate. However, its fertility rate is reducing just as the case in other developing countries for example from 7.0% between 1990-1995 and to a projected rate of 4.8% between 2010-2015.
The disappearing jobs and the devaluation in the home prices had compelled the consumers to cut down on their costs which adversely affected the labor market as the business laid off their workers to reduce costs, eventually making the country enter into a vicious downward cycle.
oyment is perilous for a country which is the reason why the governments of both developing and developed countries are taking steps to cope with this problem in a better way.
Actually, when employment starts to create problems, no one but government can handle it in the right
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