Main Economic Characteristics Of A Free Market Economy

Though there are three different types of economies that exist – free market economy, planned (also known as command) economy, and mixed economy, this essay will focus mainly on free market and planned economies. It will examine the main economic characteristics of each of the two economies and compare how they differ from each other, while in relation to the UK public sector. A free market economy is based on supply and demand and all major economic decisions are made by individual economic agents such as households and firms and not by governments, which in turn maximises freedom and behaviour, though there will always be government involvement to a certain extent due to things such as price control (Investopedia, 2015). A free market economy is said to be a ‘pure’ capitalist system that is underpinned by private ownership where workers are able to make the most out of what they earn and are free to spend it on whatever they please (Sloman and Garratt, 2013). Price mechanism is also a characteristic of a free market economy. Price mechanism allocated resources through supply and demand – it relates to the effect the market has when it changes occur to prices and results in supply being equal to demand and demand being equal to supply (Sloman and Garratt, 2013). When it comes to the UK public sector, the majority of goods and services are free market though the country as a whole is not simply a free market economy as there are some aspects which could be consideredShow MoreRelatedMarket vs. Command Economy Essay1069 Words   |  5 PagesMarket vs. Command Economy What is the main purpose of the economic system? The main purpose of the economic system is method used to produce and distribute goods and service. 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