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To establish what constitutes wealth impacts products and services, and defines the nature of business cycles, studying both macroeconomics and microeconomics is required. The connection between macroeconomics and microeconomics is quite explicit. One of the prime examples where such a close association may be pointed out is a competitive marketplace. This essay will discuss the prerequisites for competitiveness in the market, the role of the government, and contributing factors.
Enhancing the competitiveness of the marketplace benefits the economy, companies, and customers. A certain degree of freedom, the lack of barriers to entry, and a large number of agents are all prerequisites for fueling competition and helping a country prosper (World Bank 56). Each company seeks a self-directed gain which is only possible through serving their customers. At that, the so-called invisible hand conducts a selection, distinguishing between companies that succeed at satisfying their customers and thus and those who do not.
This mutual profitability that is mainly possible under capitalism may lead to a conclusion that socialism is entirely disadvantageous. Indeed, one may observe how government policies that had strong socialist leanings were detrimental to countries’ economies (Legates 17). When supply is planned, and actual demand is not taken into account, businesses either do not have the chance to emerge or are deprived of incentives, which disrupt their cycles.
Economy and market trends such as aggregate production and consumption levels depend on the choices made by individuals and companies. However, the freedom of choice and the autonomy of both companies and customers should be in place to make a marketplace competitive. Such freedom is often seen as opposed to government involvement which indeed, can be damaging, especially under a strong ideological influence.
Legates, David R. “The Experiment: Capitalism versus Socialism.” Journal of American Physicians and Surgeons, vol. 22, no. 1, 2017, pp. 17-21.
World Bank. World Development Indicators 2014. World Bank Publications, 2014.