Economics: Free Market Economy

Questions and Answers

Profit motive

No government intervention in economic matters

Widening income inequality between countries

Voluntary exchange and trade Signup and view all the answers

They operate globally, investing and producing in multiple countries Signup and view all the answers

Environmental degradation and resource exploitation Signup and view all the answers

Study Notes

Characterized by private ownership of means of production and creation of goods and services
Government intervention is minimal, allowing market forces to dictate prices and resource allocation
Key features:
- Voluntary exchange and trade
- Competition among businesses
- Price mechanism determines resource allocation
- Profit motive drives innovation and efficiency

A extreme form of free market economy where government intervention is zero or minimal
Key principles:
- Non-interference of government in economic matters
- No regulation of businesses
- No public goods and services
- No social welfare programs
Criticisms:
- Inequality and poverty may rise
- Environmental degradation and exploitation of resources
- Monopolies and oligopolies may form

The increasing integration of economies worldwide through trade, investment, and technology
Characteristics:
- Free flow of goods, services, and capital across national borders
- Multinational corporations (MNCs) operate globally
- Outsourcing and offshoring of jobs
- Rapid growth of international trade and finance
Effects:
- Economic growth and job creation in some countries
- Increased competition and efficiency
- Cultural homogenization and loss of local industries
- Widening income inequality between countries and within countries

Private ownership of means of production and creation of goods and services
Minimal government intervention, allowing market forces to dictate prices and resource allocation
Voluntary exchange and trade between individuals and businesses
Competition among businesses drives innovation and efficiency
Price mechanism determines resource allocation, leading to efficient allocation of resources
Profit motive drives businesses to innovate and reduce costs

Extreme form of free market economy with zero or minimal government intervention
No government regulation of businesses, leading to potential exploitation
No public goods and services, such as healthcare and education
No social welfare programs, leaving individuals to fend for themselves
Criticisms include:
- Rising inequality and poverty due to lack of government support
- Environmental degradation and exploitation of natural resources
- Formation of monopolies and oligopolies, leading to reduced competition

Integration of economies worldwide through trade, investment, and technology
Free flow of goods, services, and capital across national borders
Multinational corporations (MNCs) operate globally, leading to increased economic interdependence
Outsourcing and offshoring of jobs to take advantage of cheaper labor
Rapid growth of international trade and finance, leading to increased economic activity
Effects include:
- Economic growth and job creation in some countries, particularly in export-oriented industries
- Increased competition and efficiency, leading to lower prices and better quality products
- Cultural homogenization, as local industries and cultures are replaced by global brands
- Widening income inequality between countries and within countries, as some individuals and groups benefit more than others