Question

In: Economics

How the “free market” system ties into these different economic systems, as well as their role...

How the “free market” system ties into these different economic systems, as well as their role in today's economy and the global market..

Solutions

Expert Solution

Free market system which encompases the globalisation of companies and thus increases the reach and scope, leads to further improvement and transfer of technology between several regions in the world. Thus the regulations and usage of technology is upgraded constantly because of the free market mechanism as global economic systems survive on globalisation in this day and age.

Free market ensures limited government regulation and enhanced competition which leads to global players winning the markets based on price competitiveness and service quality. Thus the free market system ensures stable supply with respect to the demand conditions and if a domestic economy doesn't have sufficient demand, exports drive the domestic economy, there by leading to increased participation in the global market.

Global companies charge the highest price consumers are willing to pay for that certain market, which ensures workers also earn highest wages which the companies are willing to pay, this increases economies of scale and profitability of companies. If a country has a free market mechanism such as US, the output increases substantially as profits drive businesses and thus countries with more freer markets have enhanced standard of living and wealth generation.


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