Free Market Economy: Examining Its Advantages and Disadvantages

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A free market is a market that the government is not involved in. The lack of control gives opportunity to set prices between product, supply, and consumer demand. It is totally opposite to government-enforced price controls, as seen in many socialist and communist countries. Lack of government control allows free market economies a wide range of freedoms, but with some drawbacks.

Free market allows business owners to provide innovations, develop new products and services. Entrepreneurs can research consumer demands and popular trends to meet the customer's needs through innovation. These also breeds competition among firms, as each firm attempts to improve on the previous product generations by adding more and better features to existing products. Competition between companies provides the best possible product to the customer at the best price.

Money of the customers drive free market economy, because only customers make decision what product is better and if it worth spending money on it. Comparing two similar products for similar price, customers make final decision what product is more competitive. Customers also determine price for product, which should be high enough to make a profit, but not too high so that customers may go to opponents.

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Free market economy also helped such countries like Hong Kong. Now, it is a country with the most freest economy in the world. This country does not have strict taxes. It has no tariffs on imported goods, and it levies excise duties on only four commodities, whether imported or produced locally: hard alcohol, tobacco, oil, and methyl alcohol. Free trade with other countries gave push for the economy of Hong Kong. Government of Hong Kong removed restrictions on investments, and on corporate or sectorial ownership.

Milton Friedman believed that only capitalism and free economy can push progress forward. Since the government is not dictating their own rules, businesses will have no obstacles in production of goods, as they are able to increase their profit. If producers see demand for the product, they will increase production of the goods. As a result, consumers will be offered a wider variety of goods and services compared to other systems of economy. From that we have another statement that if somebody buys that, somebody will produce it. That increases quantity of working places, and develops economy.

Free market economy system is not ideal, and also has its own disadvantages. One of are that only those people with resources may take part in a market economy. This creates a huge gap between the rich and the poor. People with the most resources will gain success, at that time people without resources get poorer. As economy will expand, some services may have problems offering their services for low prices. It also causes such problem that non profitable goods and services will not be produced. Unprotected citizens may suffer from that. In these cases, government can try to force businesses to make the services available at a reasonable cost to consumers, because the service benefits the society as a whole.

Sometimes a free market economy may change from competion among companies to monopolies, by creating barriers to entry in the market for new companies. With collaboration of private businesses, monopolies may become a more common occurrence, pushing small competitors out of the market and giving market advantages to the large companies. With the lack of regulations made by government, monopolies can set the prices of products artificially high, provide poor services or low quality of goods. Competition in that position can not exist and nothing can be done about it because government has no policies to intrude into a free market economy. This makes the conception of a free market economy unrealistic, as it repress all the goals it wants to achieve.

As a conclusion, this type of economy has its own advantages and disadvantages. In my opinion it is not a market system which countries should implement into their economy, as it may cause problems for economy and society of this country. A fully governed economy is also not the best choice for the country either. The best case is cooperation of government and businesses, because power of government is important in solving problems within the economy as it do not seek profit, but wants to develop a better economy, and the businesses should aim in production of goods.

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Free Market Economy: Examining Its Advantages and Disadvantages. (2023, May 18). WritingBros. Retrieved July 21, 2024, from https://writingbros.com/essay-examples/free-market-economy-examining-its-advantages-and-disadvantages/
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Free Market Economy: Examining Its Advantages and Disadvantages [Internet]. WritingBros. 2023 May 18 [cited 2024 Jul 21]. Available from: https://writingbros.com/essay-examples/free-market-economy-examining-its-advantages-and-disadvantages/
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