Advantantages Of Free Market Economies

Question 1

Economic efficiency

Answer 1

• competition means that firms try to keep production costs down in order to sell goods and services at competitive prices
• competition also means that firms try to produce goods that consumers demand (allocative efficiency) this means the price mechanism will equate consumer demand

Question 2

Quality of products

Answer 2

-Competition means that firms continuously try to improve the quality of their products to gain an advantage over rivals

Question 3

Greater choice

Answer 3

• consumers can often choose to buy from a wide selection of goods and services: workers often have a wide choice of employment opportunities

Question 4

Financial incentives

Answer 4

• entrepreneurs have an incentive to invest and take risks in order to each profit labour has an incentive to work and even more in turn