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Can You Explain The Dynamic Functions Of Market Economy?

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Muhammad Abdullah786 Profile
The market mechanism also performs a vital function of adding to the resources. the dynamic function or growth of economies is performed by price mechanism through the provision of various incentives. These incentives promote consumption, production and capital accumulation including improvement in technology.

Incentives via consumers:
When goods are available in free and open market to the consumers, provided they can pay the price, they create incentives for the consumers to increase their incomes. The consumers, who are also factor suppliers, make efforts to work more, improve their skill, save more, improve land, become better organizers by adopting cost reducing technique etc. as a result of such all acts performed on the behalf of consumer suppliers, not only the supply of resources will increase, but the production and employment will also be stimulated.

Incentives via producers:
The producers in the market economy have to take risk, make innovations and follow such a business strategies so that they could have an upper edge over their rivals and reap high economic profits. The abnormal profits attract new entrepreneurs, and ultimately the profits become lower. But the enterprising producers leave in search of new lines of production to make higher profits. Thus the new resources discoveries are made , new industries are established, new technologies come into being they all contribute to the process of the economic growth.

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