The free market economy
Let's have a look at the good and the bad!
INDEX
The pros of a free market economy
Click here to go to the pros
The cons of a free market economy
Click here to go to the cons
It drives innovation
A free market economy opens the door wide for innovation, which is highly important for businesses. Through this kind of economy, business owners can develop new products and services without much intervention from the government. They can create what they see is fit for the public based on consumer demands and popular trends. As such, they can provide consumers with what they need.
Innovation also drives competition. As such, products will only get better as companies try to improve upon previous models in order to best the competition.
It is powered by the customers
Customers play a vital role in the success and failure of the products and services. It depends on the liking of the consumer whether to buy products or not. Thus the success or failure of a product lies in the hands of customers. When they like it, they will demand more of it. If they don’t, then there won’t be any clamor for it. This is best demonstrated in products or services that are similar. It’s quite clear which one is preferred based on sales results.
Customers also provide the deciding factor when it comes to pricing. Producers set a certain amount but customers decide which one is best based on quality and affordability. So the free market always tries to create things that are fit for the consumer. Products are designed in new models to increase efficiency which leads to competition among producers.
Demands are made by customers for a product that is efficient and long-lasting. This leads to creating things suitable for the buyer which in turn increases the sales and economy as a whole.
Free markets are encouraged to make profit
Producers, consumers, and employees are all benefited as the market grows. After making a profit from the company the market share rises which benefit individual or investors. The collected capital is now invested in other or the same business to seed the future of the company. People who work in the company will get an income which they can spend on goods and services again.
Free market economies regulate themselves naturally
Supply and demand principles govern a free market economy, which means the decisions that people make enable a process of self-regulation. If goods or services don’t meet the ethical standards that consumers have for their transactions, then a choice to avoid those items will put pressure on the organization to make changes. Misleading people about the quality of an item or the availability of services causes circumstances that could force the company into bankruptcy or worse.
A free market economy creates a rising tide that lifts all boats
The free market economy might have a self-focus as its top priority, but that shouldn’t be viewed as a lack of compassion from an outside perspective. The goal of this approach is to improve the standard of living for everyone. It’s the epitome of the expression that a “rising tide lifts all boats.”
Companies are developing goods and services as a way to solve the pain points of consumers at the local level. Although the motivation might be selfish in doing so, the only way to create profits is to find ways to help others.
It is a profit-driven economy
Profit is good for business. But businesses that are so focused on profit often forget the bigger picture: that there are employees working hard to make a product. Sometimes, businesses neglect their workers just for the sake of earning greater rewards. The health of employees is neglected because they have to produce a good product to earn bigger sales.
Sometimes, even environmental standards are forgotten just so a business can earn money. This may lead to pollution and environmental destruction.
It causes devastating results when it fails
There are severe consequences whenever a market fails. We can only look at history for evidence: the Great Depression of the 1930s and the real estate crash of 2008 are two good examples. It wasn’t just one country that was affected – it was the whole world. People lost not just their jobs but also their homes. While some have managed to get back up on their feet, some have taken longer to recover.
There are products and services that won’t perform well in a free market economy or which even may be harmful. Moreover, some of the products and services produced in the free market are of low standard and quality which needs to be properly managed and regulated by the government agencies to ensure the long run of the free market and to avoid e.g health risks.
Bigger is often better
Large companies with a large amount of capital, investors, and labour usually have an advantage over small scale companies or producers. The reason for this is small producers don’t have the resources to make competition with large producers. This causes small producers to face many challenges regarding sales of products to give continuity and eventually losing their business.
This gives rise to monopolies which in turn decreases the economy of the country. This means all depends on the same company for receiving services and customers are discouraged to make demands of their choice. A monopoly can also abuse its market power by setting (high) prices and reducing quality without the consumer being able to go for an alternative.
A free market economy can provide limited product choices
Organizations in a free market economy don’t pursue the development of products unless there is a profit potential available. That means limitations in the range of goods and services offered to consumers can exist locally, nationally, or internationally. This disadvantage can impact specific groups of customers more than others based on household income and other factors.
Those who are unable to produce in a free market economy get cast aside
The free market economy emphasizes an individual’s ability to contribute to a company’s profits or ability to innovate. That means able-bodied workers always have a top priority in a society dominated by the structure. Children, the elderly, the disabled, and anyone else who is unable to maintain their quota will have a secondary status.
Pros and Cons of free market economy
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Transcript
The free market economy
Let's have a look at the good and the bad!
INDEX
The pros of a free market economy
Click here to go to the pros
The cons of a free market economy
Click here to go to the cons
It drives innovation
A free market economy opens the door wide for innovation, which is highly important for businesses. Through this kind of economy, business owners can develop new products and services without much intervention from the government. They can create what they see is fit for the public based on consumer demands and popular trends. As such, they can provide consumers with what they need. Innovation also drives competition. As such, products will only get better as companies try to improve upon previous models in order to best the competition.
It is powered by the customers
Customers play a vital role in the success and failure of the products and services. It depends on the liking of the consumer whether to buy products or not. Thus the success or failure of a product lies in the hands of customers. When they like it, they will demand more of it. If they don’t, then there won’t be any clamor for it. This is best demonstrated in products or services that are similar. It’s quite clear which one is preferred based on sales results. Customers also provide the deciding factor when it comes to pricing. Producers set a certain amount but customers decide which one is best based on quality and affordability. So the free market always tries to create things that are fit for the consumer. Products are designed in new models to increase efficiency which leads to competition among producers. Demands are made by customers for a product that is efficient and long-lasting. This leads to creating things suitable for the buyer which in turn increases the sales and economy as a whole.
Free markets are encouraged to make profit
Producers, consumers, and employees are all benefited as the market grows. After making a profit from the company the market share rises which benefit individual or investors. The collected capital is now invested in other or the same business to seed the future of the company. People who work in the company will get an income which they can spend on goods and services again.
Free market economies regulate themselves naturally
Supply and demand principles govern a free market economy, which means the decisions that people make enable a process of self-regulation. If goods or services don’t meet the ethical standards that consumers have for their transactions, then a choice to avoid those items will put pressure on the organization to make changes. Misleading people about the quality of an item or the availability of services causes circumstances that could force the company into bankruptcy or worse.
A free market economy creates a rising tide that lifts all boats
The free market economy might have a self-focus as its top priority, but that shouldn’t be viewed as a lack of compassion from an outside perspective. The goal of this approach is to improve the standard of living for everyone. It’s the epitome of the expression that a “rising tide lifts all boats.”
Companies are developing goods and services as a way to solve the pain points of consumers at the local level. Although the motivation might be selfish in doing so, the only way to create profits is to find ways to help others.
It is a profit-driven economy
Profit is good for business. But businesses that are so focused on profit often forget the bigger picture: that there are employees working hard to make a product. Sometimes, businesses neglect their workers just for the sake of earning greater rewards. The health of employees is neglected because they have to produce a good product to earn bigger sales.
Sometimes, even environmental standards are forgotten just so a business can earn money. This may lead to pollution and environmental destruction.
It causes devastating results when it fails
There are severe consequences whenever a market fails. We can only look at history for evidence: the Great Depression of the 1930s and the real estate crash of 2008 are two good examples. It wasn’t just one country that was affected – it was the whole world. People lost not just their jobs but also their homes. While some have managed to get back up on their feet, some have taken longer to recover.
There are products and services that won’t perform well in a free market economy or which even may be harmful. Moreover, some of the products and services produced in the free market are of low standard and quality which needs to be properly managed and regulated by the government agencies to ensure the long run of the free market and to avoid e.g health risks.
Bigger is often better
Large companies with a large amount of capital, investors, and labour usually have an advantage over small scale companies or producers. The reason for this is small producers don’t have the resources to make competition with large producers. This causes small producers to face many challenges regarding sales of products to give continuity and eventually losing their business.
This gives rise to monopolies which in turn decreases the economy of the country. This means all depends on the same company for receiving services and customers are discouraged to make demands of their choice. A monopoly can also abuse its market power by setting (high) prices and reducing quality without the consumer being able to go for an alternative.
A free market economy can provide limited product choices
Organizations in a free market economy don’t pursue the development of products unless there is a profit potential available. That means limitations in the range of goods and services offered to consumers can exist locally, nationally, or internationally. This disadvantage can impact specific groups of customers more than others based on household income and other factors.
Those who are unable to produce in a free market economy get cast aside
The free market economy emphasizes an individual’s ability to contribute to a company’s profits or ability to innovate. That means able-bodied workers always have a top priority in a society dominated by the structure. Children, the elderly, the disabled, and anyone else who is unable to maintain their quota will have a secondary status.