The Regulatory Mechanism of the Market System

Written by daniella lauren
  • Share
  • Tweet
  • Share
  • Email

A market system is the economy found within a nation. It is an accumulation of buyers and sellers engaging in various economic transactions. Like any economy, a free market system has a regulatory mechanism, both natural and artificial.

Other People Are Reading

Facts

The regulatory mechanism in the free market system is competition. Competition drives the acquisition and use of economic resources and the sale of goods and services to consumers. High competition is a natural factor for keeping production costs low to attract more consumers into buying a company's products.

Features

Supply and demand is a common economic theory applied to a free market system. This graph allows companies to determine at what price point they will sell the most goods or services. Competition---primarily from substitute or inferior products---plays a regulatory role because these products affect the demand for a company's products.

Considerations

The government can play a regulatory role in the market system. Too much involvement results in a command economy, where the government dictates many economic transactions. Although some regulations are necessary in the market system, the long-term effects of these policies may not produce desired results.

Don't Miss

Filter:
  • All types
  • Articles
  • Slideshows
  • Videos
Sort:
  • Most relevant
  • Most popular
  • Most recent

No articles available

No slideshows available

No videos available

By using the eHow.co.uk site, you consent to the use of cookies. For more information, please see our Cookie policy.