Q:

What are the advantages and disadvantages of a free market economy?

A:

Quick Answer

According to the Houston Chronicle, advantages of a free market economy include freedom of innovation and the ability of customers to drive choices in addition to disadvantages such as the danger of the profit margin and market failures. Other advantages include a quick response to consumers' demands, a wide variety of services and goods, and efficient use of resources. However, disadvantages also include unemployment, ignored social costs, and unavailability of some goods and services.

Continue Reading

Full Answer

The Chronicle explains that business owners innovate new ideas, develop new products and offer new services in a free market economy. This innovation comes with little to no government interference in telling entrepreneurs what new products the public wants. The Chronicle also explains that consumers ultimately decide which products fail when they choose what to buy. However, the goal of creating a profit margin makes the free market economy dangerous ethically because sometimes business owners rank the pursuit of profit over the well-being of their employees and their customers.

The Chronicle further states that the free market economy has other potential harms if it is unchecked. For instance, far-reaching incidents such as the Great Depression of the 1930s and the real estate market crash of the early 2000s leave many people unemployed, homeless and without an income.

Learn more about Economics

Related Questions

  • Q:

    What are the advantages and disadvantages of niche marketing?

    A:

    The advantages of niche marketing are focusing on more profitable market segments, ability to establish solid relationships with members of a market segment and increased return on investment for marketing dollars. Disadvantages of niche marketing include increased difficulty in exposing a product to a broad spectrum of consumers, inability to create mass market appeal and limited sales potential. The effectiveness of niche marketing depends on the product.

    Full Answer >
    Filed Under:
  • Q:

    What is a private enterprise system?

    A:

    A private enterprise system is the foundation of free market capitalism; it involves open markets and competition and is led by private individuals seeking profit. In private enterprise, the government and its agencies do not control businesses or profitability.

    Full Answer >
    Filed Under:
  • Q:

    What type of economic system does Japan have?

    A:

    Japan has an industrialized global free market economy. A free market economy is a competitive economic system in which businesses compete with each other for profit and the prices of goods and services are based on supply and demand. Japan's economic system is very similar to that of the United States.

    Full Answer >
    Filed Under:
  • Q:

    What type of economy does Brazil have?

    A:

    Brazil's economy classifies as free market, which features an exchange of goods, services and commodities internally and with other nations. Brazil varies in degree of economic freedom; in the early 2000s, Brazil's economy classified as mostly free, then waned in status to a status of "mostly unfree" in the latter half of the decade.

    Full Answer >
    Filed Under:

Explore