Power of Markets

Whelan and Three Significant arguments about markets:

In "Naked Economics" Whelan discusses the power of markets and their significance on the global economy. One aspect of markets is the notion of firms and their interest of maximizing profits while aiming to maintain efficiency. Firms need to compete with one another in order to succeed financially. They can do this by being cost competitive and offering the lowest price for the consumer or by having the better quality product. As Whelan also discussed, this can de done regulated based on a nation's economy, such as a free market economy such as in America or in a communism based economy as was present in the former soviet union. In a free market, firms are able to set there own prices and compete with one another that way. However, in a communist system, the government regulates the selling price, thus firms must compete through having the better quality product. Another element of the market is the notion of supply and demand. He discussed the issue of "Who feeds Paris?" and discussed that based on what the consumer wants, that is what producers must provide. If people want to eat fish, then restaurants will order more fish, thus affecting the fishing industry. When products are in demand, price increases, but also on the flip-side, if there is an ample supply of product and no demand, price will decrease. Natural resources are in limited supply, thus scarcity and using resources most efficiently are also elements of the market. Another element of the market system is the notion of utility and incentives. People make choices in order to increase their utility, or general happiness. People make choices in life in order to increase their utility, either materialistic or emotional. Incentives characterize people's motives behind their decisions, and these are dictated by policies and regulations.