Question

In: Finance

(1) What is the market economy? How do the financial markets interact with product and labor...

(1) What is the market economy? How do the financial markets interact with product and labor markets to allocate scarce resources efficiently in the market economy?

Solutions

Expert Solution

Market Economy is an economic model in which the decision regarding production, investment and consumption depends upon the market prices. The market prices in turn depends on the supply and demand factors.

The product market refers to the marketplace where the final goods and services are being for purchase or sale by market participants i.e. business and public enterprises. Labor market refers to interaction of workers and the employers which in turn determines the wage level of labors in particular industry.

In an economy the resources be it capital or labor are always scarce. In market economy the capital will be allocated to those product where there will be more demand than supply. As a result there will be more allocation to labor in those sector/industries. The capital will flow away from product/ industries where there is less demand and as a result there will be less labor demand.

jeff jeffy answered 3 months ago
Next > < Previous

Related Solutions

3. Explain the roll of debt and equity markets in the economy. How do they interact...
3. Explain the roll of debt and equity markets in the economy. How do they interact with both Primary and Secondary Markets? What roles do debt and equity markets and primary and secondary markets play in the “flow of funds?”
Consider the “Robinson Crusoe” economy with two markets - product market and labor market. Assume the...
Consider the “Robinson Crusoe” economy with two markets - product market and labor market. Assume the utility function of the consumer is given by ? = ?(?, ?), where ? denotes consumption and ? stands for leisure, and the production technology is given by ? = ?(?), where ? is output and ? denotes labour input. Furthermore, assume the price of the consumer good to be equal to one, and the price of labour equal to wage rate, ?, and...
What do financial markets do? Why are financial markets important to a society? How do financial...
What do financial markets do? Why are financial markets important to a society? How do financial markets accomplish what they do? What are asymmetric information problems and why would this problem in financial markets matter to society?
What do financial markets do? Why are financial markets important to a society? How do financial...
What do financial markets do? Why are financial markets important to a society? How do financial markets accomplish what they do? What are asymmetric information problems and why would this problem in financial markets matter to society?
What is the primary role of financial markets? and what people and institutions interact in these...
What is the primary role of financial markets? and what people and institutions interact in these markets?
What is Balassa-Samuelson? Explain how comparative advantage, productivity, and domestic labor markets interact to generate this effect.
What is Balassa-Samuelson? Explain how comparative advantage, productivity, and domestic labor markets interact to generate this effect. Explain how this effect would change if all goods were tradable.
How do financial markets and related institutions contribute to the overall economic health of the economy?...
How do financial markets and related institutions contribute to the overall economic health of the economy? Imagine a CFO who believes her job is to focus exclusively on company-level issues and assumes the markets run smoothly and will provide the company with capital as it is needed, assuming it has a good justification for the capital. Is this an advisable strategy? Why or why not?
Financial markets are linked to the economy. Define financial markets.
Financial markets are linked to the economy. Define financial markets.
Describe labor and other resource markets. How is the market for labor similar to and different...
Describe labor and other resource markets. How is the market for labor similar to and different from the markets for steel or other factors of production? What can a firm do to ensure a dependable supply of these resources? Look up the concept of a spillover effect and explain how unions have benefited workers who have never been a member of a union. Union membership for non-government workers has fallen dramatically over the last 30 years, yet government workers are...
Argue on the following questions: What role do financial markets play in our economy and what...
Argue on the following questions: What role do financial markets play in our economy and what is the relationship between financial institutions and financial markets? Establishes the importance of financial markets in the economy. He mentions the financial institutions that regulate the way of doing business in the United States. Establishes a relationship between institutions and financial markets.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT