Explain the principles of free market economy ?
Answer:
In an absolutely free-market economy, all capital, goods, services, and money flow transfers are unregulated by the government except to stop collusion that may take place among market participants.
As this protection must be funded, such a government taxes only to the extent necessary to perform this function, if at all. This state of affairs is also known as laissez-faire.
Read 'The Wealth of Nations' by Adam Smith. Its all in there.
I have something to sell and you want to buy it. I state my price and you decide if it is right for you. You either choose to buy or not to buy.
If the economy is not free then I will have someone above me who says that they will offer it to you at a subsidised price. You gain at that moment in time.
BUT - the other people that you are also negotiating with will also make offers. The price will possibly be brought down and down. It is the producer that will get less money.
You will gain at that time, but eventually the producers will be priced out of the market - then if there are no competitors the price for the commodity will go through the roof. Who loses then - the person that wanted the lowest price in the first place - but by now it is too late because the supplier no longer exists.
Anybody is free to invest, produce, sell, buy, etc. any legal product or service at the price that both seller and buyer agree.
Business which fail to produce enough go bankrupt and close, the Government does not protect them. That assures that the consumers have what they want at the best price. That is competition. The best (for the consumers) survives.
that means ban all poor countries from participating in it.
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