The paper "Free Market Economy" is a great example of an essay on macro and microeconomics. The question many of the investors could be asking themselves, is if the market economy is free without any form of influence? While in the market economy, the supply and demand for goods and services are expected to operate and determine its price, on many occasions this may not be the case. This is because it emerges that some of the products and services are very critical and cannot purely be left in the hands of private persons to take charge.
Take the example of the security, healthcare, education, external forces, and even distribution of national resources (McMillan 2002). These and many more factors tend to erode that confidence that people may be having about the existence of the market economy. In the world over, there is an element of confusion between capitalism and the market economy. Capitalism is characterized by the ways in which strong economies tend to dominate over others and therefore taking due advantages in the market and therefore need not be confused with a free-market economy.
Further, capitalism doesn't only take into account the economic process but political and social processes as well. Because of the selfish interests that exist among the key economic players, it is therefore concluded that capitalism cannot be used to mean a free market economy (Watts 2012). It is in this regard that this essay looking forward to explaining the role of the government in a free market and at the same the reasons why the free market can never be. Definition of key terms: Market economyMarket economy refers to an economy where major decisions on investment and production as well as distribution are determined by the supply and demand of goods and services and prices of goods and services are reached in a free price process.
In other words, in a free market economy, investment decisions and allocation of resource is purely a factor of the market (Jail 2010). Role of government economyFor substantial economic growth to take place according to Adam Smith, three important factors which include self-interests and property rights as well as the division of labor have to be enjoined.
While self-interests are characterized by the need by the producers to avail their products and services in the market for exchange with buyers, the sellers’ interests are founded on the need to buy goods and services at more affordable prices (Easterly 2002).
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