What are the advantages and disadvantages of a free market and government intervention?

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mkoren | Middle School Teacher | (Level 3) Senior Educator

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There are advantages and disadvantages of a free market economy and government intervention. One advantage of a free market economy is that the economy is most efficient when this condition exists. The forces of supply and demand determine prices and wages. These forces also determine how many products should be produced. Another advantage is that people are more willing to take risks and invest their money in new ideas and in new and existing businesses. Since there are few rules and regulations, people have an opportunity to make a lot of money if their idea or investment is successful.

A disadvantage of a free market economy is that businesses may do things that are harmful to the economy, workers, or society because there are few rules and regulations. They could pollution the environment or take risky chances that could send the economy into a recession or depression. These risky actions also could hurt investors and consumers. Another disadvantage is that there may be little help for those who find themselves in a difficult situation through no fault of their own. In a free market economy, there would be little government help for those who need it.

The advantages and disadvantages of government intervention are basically the opposite of those for a free market economic. When the government intervenes in the economy, people are less willing to take risks by investing in new products or businesses. The economy may also not be operating at full efficiency when the government interferes. The advantages are that those who need help probably will get it. Also, the government will take steps to prevent abuses by businesses. This should protect investors and consumers.

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