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The allocation of resources

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COMPETIION and THE ECONOMIC ENVIRONMENT Assignment: The allocation of resources STUDENT NAME: Shan Ji A free market economy is an idealized form of a market economy in which buyers and sellers are permitted to carry out transactions based on mutual agreement on price without government intervention in the form of taxes, subsidies, regulation, or government ownership of goods or services. A free market economy is an economy in which the allocation for resources is determined only by their supply and the demand for them. This is mainly a theoretical concept as every country, even capitalist ones, places some restrictions on the ownership and exchange of commodities. If a commodity is in short supply relative to the number of people who want to buy it, its price will rise, producers and sellers will make higher profits and production will tend to rise to meet the excess demand. If the available supply of a commodity is in a glut situation, the price will tend to fall, thereby attracting additional buyers and discouraging producers and sellers from entering the market. In a free market, buyers and sellers come together voluntarily to decide on what products to produce and sell and buy, and how resources such as labour and capital should be used. ...read more.


- the optimality generally refers to the distribution of products given the pre-existing purchasing power of the purchasers. The necessary components for the functioning of such a free market include no artificial price pressures from taxes, subsidies, tariffs, or government regulation, perfect (or at a minimum, equivalent) knowledge about the value of the goods, geographic availability of goods to all people, and no artificial monopolies (patents etc.) or other forms of economic coercion on the part of the actors. The state interventionism, which particularly applies to less developed nations, is restrictive import laws and regulations. Restricting foreign imports as a means to save jobs sounds plausible. Adding to the appeal of restrictive trade policy is the fact that its beneficiaries are highly visible while its victims are invisible. At the heart of most interventionist policy is a vision of justice. Most often this vision evaluates the presence of justice by looking at results. Social justice has considerable appeal and as such is used as justification for interventionist statism. There are several criticisms of the concept of social justice that Hayek has answered well, but defenders of personal liberty must make a greater effort to demystify the term and show that justice or fairness cannot be determined by examining results. ...read more.


Those certificates stand as evidence (proof) of our service. The more valuable our service to our fellow man (as he determines), the greater the number of certificates of performance we receive and hence the greater our claim on goods and services. That free-market process promotes a moral discipline that says: Unless we are able and willing to serve our fellow man, we shall have no claim on what he produces. Contrast that moral discipline to the immorality of the welfare state. In effect the welfare state says: You do not have to serve your fellow man; through intimidation, threats, and coercion, we will take what he produces and give it to you. The struggle to extend and preserve free markets must have as its primary focus the moral argument. State interventionists stand naked before well-thought-out moral arguments for private ownership of property, voluntary exchange, and the parity of markets. People readily understand moral arguments on a private basis--for example, one person does not have the right to use force against another to serve his own purposes. However, people often see government redistribution as an acceptable use of force. In a democratic welfare state that coercion is given an aura of legitimacy. The challenge is to convince people that a majority vote does not establish morality and that free markets are morally superior to other forms of human organization. ...read more.

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