Laissez Faire Economics Flashcards, test questions and answers

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What is Laissez Faire Economics?

Laissez Faire Economics is an economic system that emphasizes minimal government interference in the economy. It is based on the belief that a free market operates most efficiently, and thus should be allowed to work without restrictions or regulations. The French phrase Laissez Faire translates to let do, and refers to a hands-off approach by which the government does not intervene in economic affairs. This approach has become increasingly popular in recent years as countries around the world have begun to embrace more open-market systems.The primary idea behind Laissez Faire Economics is that governments should not impose any laws or regulations on businesses or individuals, allowing them to pursue their own interests freely. In this system, it is believed that competition between businesses will naturally drive down prices and improve quality of goods and services. Proponents of Laissez Faire Economics argue that free markets are efficient at allocating resources due to their ability to respond quickly to changes in supply and demand. They also believe that competition encourages innovation as firms strive for better ways of doing business, ultimately leading to greater overall economic growth.However, there are some drawbacks associated with Laissez Faire Economics as well. Critics argue that without government intervention, certain industries could become monopolized by one large firm while smaller companies struggle against unfair competition practices such as price fixing or predatory pricing tactics used by larger firms with more resources available at their disposal. Additionally, some worry that without sufficient regulation in place businesses may take advantage of consumers through deceptive marketing practices or other forms of unfair business behavior. Finally, it has been argued that Laissez Faire Economics can lead to greater income inequality since those at the top tend benefit from reduced regulations more than those lower on the income scale who might struggle with rising costs due lack of protections from predatory businesses practices.