Question

Q. Every country’s economy contains specific traits. In this regard, consider the following statements:

Which of the above can be considered as the characteristic(s) of a “Market Economy”?

• A.
  1 only
• B.
  1 and 2 only
• C.
  1 and 3 only
• D.
  2 and 3 only

Answer 1

The correct option is A

1 only
Explanation:

Economies are generally two types. One is a centrally planned economy and a market economy.

In the centrally planned economy, the central authority (government) plans all the important decisions regarding production, exchange and consumption of goods and services are made by the government. Further, that authority works for the welfare of all the sections of the society. Hence if a good or service which is essential for a certain community is absent then the government might try to induce the individuals to produce adequate amounts of such a good or service or the government may itself decide to produce the good or service in question.

In a market economy, all the economic activities are organised through the market i.e. there will be a free interaction of individuals pursuing their respective economic activities.

Statement 1 is correct: In this scenario, even though the government is present it is not bothered about the costly education services and it is leaving it to the choices of individuals thus characterizing a market economy.

Statement 2 and 3 are incorrect: In this case, the Government is intervening to make goods and services affordable by the common people as they are not present at affordable prices.