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Explain why the free-market system brings efficiency as well as freedom.

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catina18 | Student, Undergraduate | eNotes Newbie

Posted February 18, 2010 at 4:08 AM via web

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Explain why the free-market system brings efficiency as well as freedom.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted February 18, 2010 at 4:11 AM (Answer #1)

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According to economists, the free market system brings efficiency because customers are free to buy from whatever company they want to buy from.  If they do not like the way one company does things they can buy from another.  If one company does things inefficiently, its prices will go up (because it spends more money on doing things inefficiently) and people will stop buying from that company.

Because the free market allows for competition between companies, it forces them to be as efficient as possible so they will not lose customers.

The free market brings freedom because people are free to buy whatever they want or to produce whatever they want.

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enotechris | College Teacher | (Level 2) Senior Educator

Posted February 18, 2010 at 11:27 AM (Answer #2)

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One of the factors that made England an empire and the US even more so was that for many years any average Tommy or Joe had the freedom to choose their own work.  In an industrializing economy, jobs and markets expand as the demand to improve permeates the culture. Being able to be one's own boss, in a trade of one's own choosing, allows an individual to apply talents most appropriately -- one decides what one is good at, and proceeds to make a profit doing it very well. Unrestricted competition, or to use the hackneyed allusion, a level playing field, in turn, allows consumers to choose what goods and services to consume as they see fit.  This is a win-win combination that's hard to beat.  Furthermore, overall efficiency of an economic system is increased, as inefficient industries slowly die, freeing resources to be applied towards newer or better industries.  That efficiency allows the culture's standard of living to increase over time. In short, individuals choosing how to allocate resources towards what goods or services they see fit to manufacture or create, forces all goods and services to become cheaper, better, or created for the first time. Progress!

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krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted March 1, 2010 at 9:23 PM (Answer #3)

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Free market system refers to an economic system where the buyers are free to decide the products they want to manufacture and sell at prices that they decide, and the buyers are free to decide what products and what quantities they want to buy at the prices offered by sellers. This system is supposed to bring efficiency to the market by encouraging the suppliers to compete with each other, and by motivating the suppliers to produce and sell the products most desired by the consumers. It is also supposed to give freedom to everyone to take the decisions that affect their welfare.

However, it is important to note that that neither this efficiency of free market is perfect, nor its freedom complete. This is because the competition that is supposed to exist in a free-market system is not complete. AS a matter of fact every free market is known to be full of monopolies and oligopolies that enables big companies to artificially restrict their production at lower levels that enables to make them higher profits in spite of their average production cost being higher. Also freedom of consumers to choose the products they want to buy does not always result in customer buying what is in their best interest. This is because of limitation of consumers to make a fair assessment of the benefits they derive from various product. This problem is very much aggravated by the high pressure and sometimes misleading advertisement s by sellers.

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Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

Posted February 18, 2010 at 9:32 AM (Answer #4)

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In trying to determine the free market's efficiency, one has to possess a very strong faith in the marketplace.  Proponents of the free- market system believe that free enterprise is the manner by which all irregularities can be solved and that for anything which might arise, the self corrective mechanism of the marketplace is essential to the process of market efficiency.  The reason why efficiency is accomplished is because of freedom to pursue self interested ends, for when each person is guided by self- interest they are able to be content and this level of satisfaction will preclude both antagonisms and inefficiency.

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