Free Market Is the Most Efficient

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1.) ‘The free market is the most efficient way of allocating resources in Singapore.’ Do you agree?

Every society in the world, including Singapore faces the basic problem of scarcity. I.e Allocating resources occurs because there is unlimited human wants and limited resources, hence the problem of scarcity derives. There is three basic choices to be made: What, How, and for Whom to produce. Where the choice of what to produce is dependent on product prices, Product prices are determined by the market demand and supply conditions of the particular goods/services. Moreover How to produce will depend on the factor prices, where firms will adopt its least costly method to maximise revenue by minimising cost. In addition, the
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Market failure refers to a situation when the price mechanism fails to allocate resources efficiently. There are two forms of market failure. The first form: total market failure, this refers to a situation where there is a total collapse of the price mechanism due to the missing demand curve. The second form is called partial market failure, which refers to a situation where the price mechanism is unable to allocate resources efficiently resulting in overproduction (in the case of Demerit goods) or underproduction (as in the case of merit goods). There is a situation where there is total market failure. The collapse of the price mechanism is due to the missing demand curve. This occurs in the case of public goods. A pure public good has features of non-excludability, which means it is not economically feasible to exclude anyone from using the good once it is provided and non-rivalry in consumption which refers to the situation where the consumption of the good/service by a individuals does not diminish another person’s ability to consume the same good/service. The property of non-excludability give rise to the problem of ’free rider-ship’ where it is possible for a person to consume a public good without having to pay for it. From the demand side of the market, the
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