Advantages (merits) free market economy
- It provides a society with the right goods or services at the right time due to competition
- A market economy promotes entrepreneurship; because the emphasis within a market economy is on innovation, it creates an environment where entrepreneurship can thrive.
- It reduces the need to store products; because the laws of supply and demand are enforced in a market economy, manufacturers produce goods based on the demands that the society requires.
- Market economies tend to provide more jobs; because it allows very many small firms to thrive thereby creating employment.
- It increases efficiency in resource allocation. The major aim of private firms is profit maximization
- It encourages competition in production. This leads to the production of high quality goods and services at reduced prices hence better standard of living.
- It leads to the production of a wide range of commodities. This widens the choice of consumers hence better standards of living through utility maximization.
- It reduces government expenditure in form of administrative costs. This is because it does not require government officials to monitor the economic activities.
- It encourages technological progress. This is achieved through inventions and innovations due to competition among private individuals, this leads to the production of better quality goods and service.
- It promotes consumer sovereignty in the economy. Consumers have a wide variety of products to choose from.
- There is no resource wastage during the production process. Products and services are produced based on customer demands and what they are willing to pay.
CATEGORIES Economics
TAGS Dr. Bbosa Science
