Features of free market system, Managerial Economics

Features of Free Market System

The features of a free market system are:

(i)         Ownership of Means of Production

Individuals are free to own the means of production i.e. land, capital and enjoy incomes from them in the form of rent, interest and profits.

(ii)        Freedom of Choice and Enterprise

Entrepreneurs are free to invest in businesses of their choice, produce any product of their choice, workers are free to sell their labour in occupations and industries of their choice; Consumers are free to consume products of their choice.

(iii)       Self Interest as the Dominating Motive

Firms aim at maximising their profits, workers aim at maximising their wages, landowners aim at maximising their return from their land, and consumers at maximising their satisfaction

(iv)       Competition

Economic rivalry or competition envisages a situation where, in the market for each commodity, there are a large number of buyers and sellers. It is the forces of total demand and total supply which determine the market price, and each participant, whether buyer or seller, must take this price as given since it's beyond his or her influence or control.

(v)        Reliance on the Price Mechanism

Price mechanism is where the prices are determined on the market by supply and demand, and consumers base their expenditure plans and producers their production plans on market prices.

Price mechanism rations the scarce goods and services in that, those who can afford the price will buy and those who cannot afford the price will not pay.

(vi)       Limited Role of Government

In these systems, apart from playing its traditional role of providing defence, police service and such infrastructural facilities as roads for public transport, the Government plays a very limited role in directly economic profit making activities.

Posted Date: 11/27/2012 4:27:47 AM | Location : United States







Related Discussions:- Features of free market system, Assignment Help, Ask Question on Features of free market system, Get Answer, Expert's Help, Features of free market system Discussions

Write discussion on Features of free market system
Your posts are moderated
Related Questions
Paper Money Due to the risk of theft, members of the public who owned such metal money would deposit them for safe keeping with goldsmiths and other reliable merchants who

Special Drawing Rights (SDR) These are international reserve currencies created by the International Monetary Fund  (IMF) to overcome the problems of using gold and national c

discuss baumols dynamic models

Classification of oligipoly

Determine a Specific Price of demand of product A proclamation concerning the demand of a product without mentioning its price is worthless. For instance, to state that demand


Dynamics  of Unemployment and  Real  Wages through Productivity Shocks   The model  that you  are  studying here  is  in  the  tradition of  the  real  business cycle theory th

Consider a model world which is subject to a risk of global climate change. The damage is known to be from greenhouse gas (GHG) emissions as indicated by the marginal damage curve

1.  According to an article in San Luis Obispo Tribune July 21, 2006 37% of the college freshman and 48% of the college seniors carry a credit balance from month to month. Suppose

Disadvantages of a Free Economy The free market gives rise to certain inefficiencies called market failures i.e. where the market system fails to provide an optimal allocation