Free Market

What is the free market

The free market, also known as the free market economy, It is an economic system where commercial exchanges between individuals are subject to no or almost no government control or policy..

In the free market, the economic agents, that is, the producers of goods and services on the one hand, and the consumers on the other, are the ones who, voluntarily and spontaneously, satisfy their needs in the free exchange of goods and services.

Thus, in the market economy, the price or value of goods is set by the laws of supply and demandby mutual agreement between vendors, service providers and consumers.

Therefore, it is the economic agents as a whole (both companies and consumers) who assign their value to products through their individual, free, voluntary and spontaneous decisions and initiatives, without State intervention.

So that, for the companiesthe free market will mean making those decisions that are most convenient for your business, which means seeking to obtain the greatest possible amount of benefits.

For the consumersFor its part, the free market implies the freedom to decide and choose what goods or services to buy, without any type of political or legal restriction.

That is why in the free market the state authority only arises to resolve specific conflicts between economic agents, that is, to apply the law and impose sanctions on those who seek to alter or interfere with the freedom of others, or who violate agreements or contracts.

In many modern economies, the practice of some of the principles of the free market has been imposed, leaving some more or less narrow margins for state intervention.

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For some economists and politicians, the free market helps to increase the differences in income between rich and poor, which accentuates social inequality. Therefore, they propose that the State regulate the market to correct these imbalances.

For its part, the opposite of the free market is the centrally planned economy, in which it is the decisions of the state authority that determine the value of products and services, intervening in the economy and going over the other economic agents. .

See also Law of supply and demand.