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8 May, 2015 - 10:47

Pure capitalism requires freely operating competitive markets. These markets allow the excess production of firms to be exchanged. In addition, the markets permit the pricing mechanism to reflect the value of items being traded.

In a market economy the price of any item, such as a VCR, is set by demand and supply. If the VCR is in great demand, the price will be high and a large number will be produced. In a planned economy, the quantity to be produced is determined by bureaucrats.