Tuesday, February 26, 2019
Advantages and Disadvantages of Free Market Economy
THE ADVANTAGES OF FREE MARKET ( DISADVANTAGES OF COMMAND ECONOMY ) 1. Efficiency. free grocery store economies argon very competitive. Most of their industries argon assumed to be short competitive and so allocative and productive efficiency for involve occur. As their of import aim is profit motive so free foodstuff economies divvy up their resources more efficiently as comp ared to planned economy. Decisions about what to garden truck are made by the people who get out actually consume the life-threatenings. Planners are less likely to institute the correct decisions across the whole economy. 2. Choice. In free market consumer sovereighnty prevails.Firms will produce whatever consumers are lively to buy not what they think they think they would like to buy. As consumer needfully are going to be met with appropriate product than firms will soak up highschoolerr profit and will hold out much longer in the market . Due to the free enterprise factor, there are no restri ctions on what the firms can produce as a result there will be a much larger choice of goods and services in a free market economy compared with a command economy. The contriver will be more concerned in making sure as shooting there are enough essential goods to produce the product they sine qua non to produce.As firms in free market will be producing different good and services so consumers will vex variety of good and sevices to take away from. 3. Innovation. Firms will always be looking to produce something new to get ahead of their competitors. , even though the governments role is limit, one of its jobs is to protect place justifiedlys. This will include intellectual property rights through patents. Hence, there are incentives in the free market system for firms to be innovative and produce better quality products. DISADVANTAGES OF FREE MARKET ECONOMY ( ADVANTAGES OF COMMAND ECONOMYPublic, deservingness and demerit goods. Public goods cannot be provided privately beca use of their two characteristics, non-diminishability and non-excludability. These goods have to be provided publicly. Even in a very free market, one of the governments few roles will be to provide defence, for example. But there may be a problem with merit goods and demerit goods. Merit goods, like wellness and education, tend to be under provided in a free market. sure in the USA the public health system is a last resort system. People are advised to buy health insurance.Of course, the poor susceptibility not be able to afford this, and some people faculty simply decide not to bother if they feel particularly healthy. geological fault goods are bad for you. Government should ban class A drugs, and revenue enhancement cigarettes and alcohol heavily. A government with a limited role exponent not take enough action in this area, causing health problems for the economy. Of course, the advantage of a command economy is that the strong government will make sure that public and m erit goods are consumed at the right levels and that demerit goods are banned or revenueed heavily.The environment. Free market economies are likely to produce more pollution, which is bad for the environment. Command economies can make sure that the performance processes that they chose are as environmentally friendly as possible. They should be able to make sure that the level of output is the socially optimum level of output. Governments can try to force firms into producing the socially optimal level of output through the use of taxes, but governments with a limited role will not be keen to use taxes.Although the tax on petrol is high in the UK, it still doesnt cover the problems caused by the exhaust emissions (in health as well as the environment). Petrol prices have risen, but in real terms, the rise has not been as high as for bus and rail fares. In the USA, petrol is ridiculously cheap. The token(prenominal) tax on the good does not begin to cover the environmental damag e. Having said all that, the command economies of the 80s had notoriously poor records on the environment. In theory, they should have been able to monitor pollution levels closely, given that they had control of production but this simply did not hapeen.
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