Free Market System Q1

Q.
b) Explain the advantages and disadvantages of the following economic systems:-

i) Central command system. (5 marks)
ii) Free market system. (5 marks)
iii) Regulated or mixed market system. (5 marks)

(15 marks, 2013 Q1b)

A.
ii) Free market system. A free market is a market system in which the prices for goods and services are set freely by consent between sellers and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.

A free market contrasts with a controlled market or regulated market, in which government intervenes in supply and demand through non-market methods such as laws creating barriers to market entry or directly setting prices.

A free market economy is a market-based economy where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy, and it typically entails support for highly competitive markets and private ownership of productive enterprises. Although free markets are commonly associated with capitalism in contemporary usage and popular culture, free markets have been advocated by market anarchists, market socialists, and some proponents of cooperatives and advocates of profit sharing.[1]