Free Market Characteristics

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In principle the economic characteristics of a free market economy should completely contrast with that of a planned economy as they are on polar sides of the spectrum. This is mostly true, however there are a few characteristics that slightly overlap. To begin with the ownership of the two economies is extremely diverse. In the free market nearly all of the factors of production are owned privately and the market forces are allowed to guide the allocation of resources with in a society. This heavily contrasts to the ownership within a planned economy, where most of the country’s factors of production are owned publicly by the government and the government undertakes the coordination role of planning and directing the allocation of resources…show more content…
This is a very simple answer for a planned economy, which is the government or the planners decide what will be produced and how it will be produced. These planners discuss what are needs are and what luxuries we need and then decide on the quantities of output and the factors of production. Simply the government controls everything from production to consumption. This does mean that consumers often lack the freedom and choice of a free market, but many will argue that the planned economy is fairer. There is a distinct contrast between this system and that of a free market. In a free market they consumers decide what to be produced and the allocation of the factors of production via their buying power. Simply the consumers have all the power to dictate the firms, this is known as consumer sovereignty. This puts pressure on market and producers to fulfil the wants of the consumers so to make the most profit and beat their rivals. Again this creates a competitive and driven system. Therefore a more effective and motivated, which many would argue is…show more content…
The free market system tends to create an unfair distribution of income as companies are competing against each other and you can have unsuccessful season due to your competitor’s new advertisement etc, such as if your company bring out a new phone the same time as a wealthier company brings out their new phone and can advertise more, you may lose a lot of the demand and therefore money due to more demand for the other phone. Therefore leaving you with very little profit and income. This eventually leads to the wealthy consuming a disproportionately large share of what is produced. On the other hand the opposite of this, a planned economy, seems a lot fairer. As in a planned economy, the planner tries to be fair in distributing the output of the economy. Wages are determined by planners, as are the prices of the goods produced. Therefore the government is technically determining how much each consumer can consume. This pleases the less fortunate but the wealthy often are resentful. The reverse opinion of that of a free market. Overall a free market is very different to a planned economy in both the production through to consumption. However the argument of which was in more effective or fairer is up to interpretation. However every economy needs a certain level of control, thus why nowhere in the world has a completely free
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