Free Market System Flashcards, test questions and answers
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What is Free Market System?
A free market system is an economic system in which goods and services are exchanged freely on the open market with no intervention from government or other entities. This means that buyers and sellers can freely exchange goods and services at prices they believe to be fair without any external regulation. In a true free market, there are no taxes, subsidies, regulations or price controls; the only thing driving prices is supply and demand.The most prominent advantages of a free market system include freedom of choice for consumers, increased competition among businesses leading to lower prices for consumers as well as increased efficiency in production due to technological advances made by firms competing against one another. Furthermore, since resources are allocated according to consumer preferences rather than through central planning, it allows for more efficient use of resources resulting in greater overall productivity. Additionally, the lack of regulation provides incentives for entrepreneurs to innovate new products and services that would not likely be produced under a regulated environment. Finally, free markets also allow individuals who possess certain skillsets or abilities to benefit from their talents in ways that may not be available in other economies where government-imposed barriers exist. On the downside however, many people feel that a completely unregulated marketplace leaves too much power concentrated into the hands of those who have access to resources such as capital or technology while leaving little opportunity for those without them. Moreover some argue that without proper regulatory oversight businesses will engage in unethical practices such as monopolization or collusion resulting in higher prices for consumers while reducing competition within industries thus damaging social welfare over time.