what is the concept of a free market?

Question

can you outline and explain in simple terms the basic concept of a free market

Answer 1

Trade without moral considerations

Answer 2

Hello,

YES! the free market concept is VERY VERY complex in reality but the initial idea is quite straight forwards. A free market is a zone, or area, or number of countries where the price of goods & services & money is determined by the market itself. Meaning that prices are determined NOT by restrictive practises or by governments but by what the market for those goods or service can stand.

**Essentially if the market price of say soya beans is $20 a bag thats the market price or rate. Its the price of a commondity or product or service determind by what people will pay for those things.

**Think of the opposite by way of contrast, in a closed zone or closed market the prices would be fixed and despite anything else if the government says X is the price, then there is little that can be done to change this. Everyone would be forced to pay the fixed price even if the price was crazy such as $500 a bag for soya beans,etc.

Hope that helps?

IR

Answer 3

Consider a country called "A". It has got a traditional agricultural industry. It produces wheat. The yield is low, because the farmers use a traditional approach. The cost of wheat produced in "A" cost $100 per quintal.

Consider another country "B" which produces wheat with modern technology and cheap labour. It can sell wheat at a cost of $80 per quintal.

Now the buyer (customer) from country "A" should be able to choose the produce from "B" without any restriction.

Sometimes, the government of Country "A" will try to protect (naturally so) the interest of its industry and subsidise the cost of production (e.g. free electricity, no tax, tax free fertiliser etc..) and try and match the cost of wheat at $80 per quintal.

Now, the farmers of country "A" have undue advantage. That is called a protected economy. If the government allows the produce from "B" to be sold freely and let the market take control then it is said to be "Free market".

In a nutshell, the market (buyer) determines the cost of items. This logically should improve the quality of produce, with less cost for production.

Answer 4

Simply put, a free market is one that is not and is in no way controlled by a government, and it doesn't exsit today.

Answer 5

it was the bright idea that the idiots who thought up the EEC