What is a simple market economic model

A simple market economy model is a simple model of the composition and operation of a market economic system.

(As shown in the picture) In this system, production and consumption decisions are made independently by countless micro-decision-making subjects-manufacturers and households.

Their behaviors are all market behaviors, that is, supply and demand behaviors.

Manufacturers are producers. They are both suppliers of products and services (final products) and demanders of production factors. Households are consumers. They are suppliers of production factors. They obtain income by transferring production factors and are also consumers of products.

and labor demanders.

The supply and demand of products and services, and the supply and demand of production factors, constitute two basic markets, namely the production factor market, or resource market, and the final product market.

The market guides the allocation of resources and the production and consumption of products through market competition and market pricing on both supply and demand sides.

The operation of the market mechanism is also the operation of the national economy, forming the market mechanism's regulating and promoting role in the operation and development of the national economy.

The entire basic theory of Western economics is based on propositions and developments centered on the above-mentioned seemingly simple model.