In Australia, satisfaction of consumer needs and wants is based on the principles

of a mixed-marked economy.
Evaluate this statement.
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The main purpose of this essay is to evaluate how the satisfaction of consumer needs and
wants is completed differently, depending on the economic system which operates. How
each economy answers the questions relating to the key economic issues, will result in the
economic system which emerges. The difference between each economic system relates to
the level of government intervention and consumer sovereignty. Moreover, the demand and
supply curve are used to demonstrate how prices are determined in competitive markets.
The key economic issues
All economies have a system for making economic decisions about production and how it is
divided or shared between individuals. Regardless of their type, each economy must attempt
to answer the following questions:
1. What to produce?
An economy must decide what particular types of each good or service should be produced
in order to best satisfy needs and wants, and raise living standards.
2. How much to produce?
To allocate limited resources efficiently and maximise the satisfaction of wants, an economy
must make decisions about how much of each good or service it will produce.
3. How to produce?
Having decided what and how much to produce, an economy must decide how to allocate its
resources in the production process. Additionally, it must look for the most efficient method of
production which will satisfy the number of wants at any given point in time.
4. How to distribute allocation?
Having produced a certain quantity of goods and services, an economy must make a
decision on their distribution among the population.
Thus, the type of economic system that will operate is determined by how a society answers
the above questions. By answering these questions, this helps define how scarce resources
must be used in order to satisfy as many needs and wants as possible, shown in Figure 1.
Figure 1.

Different types of economic systems and their features

Planned economy
In a planned economy, the government decides what goods and services will be produced,
how they will be produced, and how they will be distributed. Additionally, government officials
consider the resources and needs of the country, and allocate those resources according to
their judgment. Therefore, the wants of individual consumers are rarely considered. The
government also usually owns the means of production.
Market economy
A market economy is based on individual choice, not government directives. In other words,
consumers and producers drive the economy in this system. Consumers are free to spend
their money as they wish, to enter into business, or to sell their labour to whoever they want.
Producers decide what goods or services they will offer, and make choices about how to use
their limited resources to earn the most money possible. Therefore, individuals act in their
own self-interest when they make economic choices. However, as they seek to serve their
own interests, they benefit others.
Mixed-Market economy
In a mixed economy, aspects of both the planned economy and market economy are
incorporated. The decisions concerning production and distribution are made by a
combination of market forces and government decision making.
Therefore, the difference between each economic system is the level of government
intervention and consumer sovereignty.
Consumer sovereignty

Consumer sovereignty means that the consumer generally has a considerable power to
make decisions through markets about the specific types and quantities of goods and
services to be produced in the economy, rather than relying mostly on government direction
or planning.
This is one of the greatest strengths if the market economy, because it is ultimately the
consumer which determines what is produced. Therefore, in a market economy, consumers
generally have a large role in the production of goods and services. Thus, the type of
economic system which exists may make it more or less difficult for consumer needs and
wants to be satisfied.
Demand and supply
The demand and supply curve is designed to explain how prices are determined in perfectly
competitive markets. Without government intervention, demand and supply will come into
equilibrium to determine both the market price of a good and the total quantity produced.
Demand
Demand can be defined as the quantity of a particular good or service that consumers are
willing and able to purchase at various price levels during a specified time period.
The law of demand
The law of demand states that when the price of a good rises and everything else remains
the same, the quantity of the good demanded will fall.
Factors affecting market demand
The main factors affecting market demand for a particular product are similar in many ways
to the factors that influence a consumers individual demand. This includes:

The price of the good or service itself

The price of other goods and services

Expected future prices
Changes in consumer taste and preferences
The level of income
The size of the population and its age distribution

The demand curve

The demand curve depicts how much of a good consumers are willing to buy as the price
per unit changes. Thus, the demand curve is a relationship between the quantity demanded
and the price, shown in Figure 2.

Figure 2.

The demand curve which is labelled D, shows how the quantity of a good demanded by
consumers depends on its price. The demand curve is downward sloping holding other
things equal, consumers will want to purchase more of a good as its price goes down. The
factors affecting market demand must also be considered when determining the quantity
demanded. However, for most products the quantity demanded increases when income
rises. A higher income level shifts the demand curve to the right (from D to D).
Supply
Supply can be defined as the quantity of a particular good or service that producers are
willing and able to sell at various prices levels during a specified time period.
The law of supply
The law of supply states that when the price of a good rises, and everything else remains the
same, the quantity of the good supplied will rise.
Factors affecting market supply
The main factors affecting market supply include:

The price of the good or service itself

The price of other goods or services

The state of technology

Changes in the cost of the factors of production

The quantity of the good available

Climatic and seasonal influence

The supply curve

The supply curve depicts the quantity of a good that producers are willing to sell at a given
price, holding constant any other factors that might affect the quantity supplied. Thus, the
supply curve is a relationship between the quantity supplied and the price, shown in Figure
3.
Figure 3.

The supply curve which is labelled S, shows how the quantity of a good offered for sale
changes as the price of the good changes. The supply curve is upward sloping the higher
the price, the more firms are able and willing to produce and sell. If production costs fall,
firms can produce the same quantity at a lower price or a larger quantity at the same price.
The supply curve then shifts to the right (S to S).
In conclusion, referring to the given statement, consumer needs and wants are satisfied by
the principles of a mixed-market economy, due to the level of consumer sovereignty.
Consumers have the ability to determine the specific types of goods and services produced,
further displayed with the aid of the demand and supply curve.