Free Market Economy

Question 1

What else is a free market economy called?

Answer 1

Capitalism

Question 2

What’s the definition of a free market economy

Answer 2

An unplanned economy in which ALL land, property and businesses are owned by private individuals, not the government

Question 3

What are the characteristics of a free market economy

Answer 3

• Aim of the business is to make a profit
• Entrepreneurs decide what goods and services to produce
• workers can choose what work to do and who they want to work for
• consumers, government and businesses spend money on goods and services
• workers and businesses make money from producing goods and services
• The government makes money from taxes

Question 4

What are the advantages of a free market economy

Answer 4

• Leads to an efficient allocation of resources because individuals are driven by a profit motive

Question 5

What are the disadvantages of a free market economy

Answer 5

• Very high levels of economic inequality
• Due to self interest, nobody looks out for the economically vulnerable
• Customers and workers are both exploited in order for entrepreneurs to make as much money as possible
• Public goods are not provided