Free Markets

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Free Markets

Advantages

  • Efficiency: Only products of best value will be in demand. This is the incentive for producers to create products as efficiently as possible.
  • Entrepreneurship: Risk taking and innovation is rewarded often with a prospect of a lot of money ... this encourages it.
  • Choice: Entrepreneurship and innovation can lead to an increase in choice for consumers.

Disadvantages

  • Inequalities: Lead to huge differences in income. In a free market, anyone who cannot work, even through no fault of their own, will recieve no income.
  • Non-Profitable Goods: e.g drugs for rare medical conditions may never sell enough to make a profit therefore firms will no longer produce them. Risk of NP goods not being made.
  • Monopolies: Successful businesses can become only a supplier of products.

Evaluation

Market failure occurs when a free market produces undesirable outcomes. 

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