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Free Markets

Free Markets

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Published by ClassOf1.com
Are you having trouble with your Economics assignments? Let us help you at http://classof1.com/homework-help/economics-homework-help/

Free Market:
This article reviews the free market economy, discussing its key concepts and looking at the various criticisms available.
Are you having trouble with your Economics assignments? Let us help you at http://classof1.com/homework-help/economics-homework-help/

Free Market:
This article reviews the free market economy, discussing its key concepts and looking at the various criticisms available.

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Published by: ClassOf1.com on May 02, 2014
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05/02/2014

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conomics
 
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Subject: Economics
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Free Market
 
 What is Free Market?
 A free market is a market economy in which the forces of supply and demand are free of intervention by a government, price-setting monopolies, or other authority. Key Concepts of Free Market:
Supply and Demand
In any market, the demand for an item refers to the level of intent to purchase the item. The buyers  bid for buying the products and the sellers are given money for the same. This is mainly referred to as the theory of supply and demand.  A similar scenario is seen in the case of waged labor. Here the laborer is the supplier who offers their working hours and labor for a price. And the businesses buy their labor depending upon the demand and type of labor required to accomplish a task. In case of increase in demand in comparison to supply, the suppliers increase the price of products (labor costs) and vice versa. The consumers are free to move to different market places depending on the prices offered on a certain product.
Economic equilibrium
 According to the general equilibrium theory, depending upon the varying degrees of mathematical rigor over a period of time and under certain specified conditions of competitions, the law of supply and demand is found in the free market that is equally competitive and influences prices towards an equilibrium in order to balance demand. Based on this equilibrium, the market is found to distribute the products amongst the buyers depending on their preferences and within the limit of their purchasing power. The result is referred to as market efficiency or Pareto optimum. This equilibrating behavior found in free market uses assumptions about the agents, referred to as Perfect Competition. Due to this, the results are the same as those, that the market can create. Some of these assumptions are difficult or rather impossible to achieve in the real world, such as lack of market power or complete information.
 
Subject: Economics
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The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.
Low barriers of entry
For a free market to function, it does not require any competition from companies to exist but needs a framework that describes the process of allowing new companies to enter the free market Hence competition is higher at markets where entry cost is lower.. Economists believe that the existence of these companies is are aimed at profits, although it may not be the case always.. A free market includes entrepreneurs (businesses and individuals) at a large scale, but may also include stock exchange and financial institutions as well.
Criticisms
There are various criticisms about the concept of free market. While some argue that free market offers an opportunity of getting more budding entrepreneurs and new businesses on a single platfo
rm and compete against each other, while others believe that it’s not true.,. There may be
times when the government may need to intervene in order to ensure that situations are always under control. In these situations, there could be a need for forced intervention to control the increase in prices and failure of market due to speculations.

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