Features of free market system, Managerial Economics

Assignment Help:

Features of Free Market System

The features of a free market system are:

(i)         Ownership of Means of Production

Individuals are free to own the means of production i.e. land, capital and enjoy incomes from them in the form of rent, interest and profits.

(ii)        Freedom of Choice and Enterprise

Entrepreneurs are free to invest in businesses of their choice, produce any product of their choice, workers are free to sell their labour in occupations and industries of their choice; Consumers are free to consume products of their choice.

(iii)       Self Interest as the Dominating Motive

Firms aim at maximising their profits, workers aim at maximising their wages, landowners aim at maximising their return from their land, and consumers at maximising their satisfaction

(iv)       Competition

Economic rivalry or competition envisages a situation where, in the market for each commodity, there are a large number of buyers and sellers. It is the forces of total demand and total supply which determine the market price, and each participant, whether buyer or seller, must take this price as given since it's beyond his or her influence or control.

(v)        Reliance on the Price Mechanism

Price mechanism is where the prices are determined on the market by supply and demand, and consumers base their expenditure plans and producers their production plans on market prices.

Price mechanism rations the scarce goods and services in that, those who can afford the price will buy and those who cannot afford the price will not pay.

(vi)       Limited Role of Government

In these systems, apart from playing its traditional role of providing defence, police service and such infrastructural facilities as roads for public transport, the Government plays a very limited role in directly economic profit making activities.


Related Discussions:- Features of free market system

Cost of production and efficiency in long-run equilibrium, What are the con...

What are the conclusions about the cost of production and efficiency in the long-run equilibrium of a perfectly competitive industry? Three conclusions regarding the cost of pr

Determine marginal cost and hourly earnings, A firm hires two risk-neutral ...

A firm hires two risk-neutral workers to assemble bicycles and pays $20 for each assembly.Charlie's marginal cost of allocating effort (measured in dollars) to the production proce

PRODUCTION THEORY, Q=5K0.4 L0.6 WHERE K is number of mchine,L s number of l...

Q=5K0.4 L0.6 WHERE K is number of mchine,L s number of labour, price of unit is RM24 & wages og each lanour rm12. the company constraint by it budget rm 1500 per time period. a) co

Electron control inc, electron control,inc.,cells voltage regulators to oth...

electron control,inc.,cells voltage regulators to other manufacturers , who then customize and distribute the products to quality assurance labs for their sensitive test equipment.

ELASTICITY OF DEMAND, THE COMPANY WOULD TO INCREASE THE PRICE OF STEEL IT...

THE COMPANY WOULD TO INCREASE THE PRICE OF STEEL IT SELLS BY 6% THE MANAGEMENT FORECAST ED THAT INCOME WILL RISE BY 4% NEXT YEAR AND THAT PRICE OF ALUMINIUM WILL FALL BY 2%. IF THE

GDP, real GDP is increasingly criticized for its alleged failure to adequat...

real GDP is increasingly criticized for its alleged failure to adequately measure the standard of living. To what extent do you think this criticism is valid?

Significance of the behavioural approach, The significance of behavioural a...

The significance of behavioural approach is difficult to assess. It provides useful insights into some aspects of business behaviour. March and Cyert have claimed considerable shor

Implications for the shape of cost function, Q. Implications for the shape ...

Q. Implications for the shape of cost function? A cost function is also a mathematical relationship, one which relates the expenses an organisation incurs on the quantity of ou

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd