Demerits of market economy
- Constant economic instabilities e.g. inflation and recession
- Encourages the growth of monopolies
- Promotes inequalities in income and wealth distribution.
- It lacks initiative to produce public and merit goods.
- It encourages preference of private gains at the expenses of public benefits e.g. over -exploitation of resources.
- Encourages misallocation of productive resources.
- Characterised by the inability to cope with unforeseen Circumstances, like rapid structural changes during times of war, floods and famine etc.
- Unemployment of labour and other resources.
- Encourages consumer exploitation due to consumer ignorance associated with the imperfections in the market.
- Duplication as many firms carry out similar activities.