The Free Market System, Demand And Supply And Allocation Of Resources

1110 WordsMar 10, 20165 Pages
In this easy there will be an introduce of these topics: the free market system, demand and supply and allocation of resources, and there will be some definition of these topic, also there will be references to support the writing. The final thing is concluding Free market system is when prices and wages are determined by competition between businesses, without government regulation and not leading the market to have monopolies sector. (Eller, E. P. (n.d.)). In a free market system there are competition high.Therefore business will want to produce their goods or services at a lower production cost. For example using non-environmentally friendly methods. In free market system governments have limited role.The government are not keen to tax business for pollution, so they have come up an idea that they can The government interfere with the price mechanism to reduce the limitations of the free market including changing to allocation of resources and goods to provide to the public so that it is a merit product. The main reasons why governments interfere are to correct market failure (Swann, G. M. (n.d.)). Therefore the distribution of income and to improve the performance of the economy can come to an equilibrium. The other ways that the government can interfere in the free market system are Legislation and regulation, taxing and provision of goods and services. Using law the government can induce price lowest price and highest price for goods and services also wages as
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