Advantages and Disadvantages of Free Market Economy
http://www.reportbd.com/articles/928/1/Advantages-and-Disadvantages-of-Free-Market-Economy/Page1.html
Super Admin
By Super Admin
Published on 1 February 2012
Advantages and disadvantages of free market economy.
Advantages and disadvantages of free market economy.
Free market economy
Advantages:
• Price mechanism allows the resources to be allocated more efficiently
• The profit motive encourages producers to be more competitive and innovative
• Efficiency makes it easier to respond to the changes in demand and supply more quickly
• May lead to higher economic growth compared to command economy
• Wide range of goods are produced allowing choice for customers
Disadvantages:
• Factors of production will be employed if only it's profitable to do so
• Private firms may fail to produce certain goods
• The free market may encourage the consumption of harmful goods such as cigarettes
• Private firms may not take social costs into account
• Gap between the rich and poor could widen
Advantages:
• Price mechanism allows the resources to be allocated more efficiently
• The profit motive encourages producers to be more competitive and innovative
• Efficiency makes it easier to respond to the changes in demand and supply more quickly
• May lead to higher economic growth compared to command economy
• Wide range of goods are produced allowing choice for customers
Disadvantages:
• Factors of production will be employed if only it's profitable to do so
• Private firms may fail to produce certain goods
• The free market may encourage the consumption of harmful goods such as cigarettes
• Private firms may not take social costs into account
• Gap between the rich and poor could widen