Free market paragraph Flashcards
Free market
The free market means that economic decisions are taken by private individuals and firms. Everything is owned and operated by private individuals. In a pure free market there would be no government intervention in the economy. Theoretical support for a free market was strongly supported by Adam Smith in his book, ‘The Wealth of Nations’. The wealth of nations tried to explain that; when people try to maximise their individual utility it actually leads to the best outcome for the rest of society.
Benefits
Firms have incentives to be efficient and provide goods and services demanded by consumers
It avoids the bureaucracy often involved in government intervention.
The profit motive provides an incentive to cut costs and make efficient use of scarce resources
Economic freedom is important for personal freedom
Free market 2
A free-market economy is an economy in which the allocation for resources is determined only by the supply and the demand for them. Put another way, the profit motive combined with individuals’ preferences allocate resources in a free-market economy.
