A free market, the features of which are present to a greater or lesser extent in various forms of management, should be studied by economic researchers. After all, this allows you to compare reality with an ideal model, draw conclusions about the state of the object. To assess and predict development, it is necessary to study the signs of a free competition market.
Market concept
A free market, the signs of which will be discussed later, should be considered from the perspective of a correct understanding of its essence.
This is not just the area on which the purchase and sale operations are conducted, but the economic system. It is based on the exchange of goods between independent buyers and sellers.
This is a fairly broad concept. To list the main signs of free competition, we should consider the market as a management mechanism.
Moreover, the interaction of subjects of trade relations is so free that it allows you to vary prices for the same products.
Such a system for developing a market economy is based on the division of labor, when all products are produced not for their consumption, but for exchange on the market.
The participants in this system are entrepreneurs, workers who sell their labor, and consumers. Market actors include households, producers, and government.
Any person can belong to each of these groups. The objects on the market are goods and money.
Free market
The free competition market is a management system that is free from any external, extraneous interference. Even the state does not regulate the processes taking place on it.
The only function allowed by the free market economy on the part of the government is to protect the property rights of the subjects of this system. By other methods, the state does not regulate the mechanism of interaction of all elements of this system.
Free market conditions imply pricing solely by means of supply and demand. This is a fairly simple law.
Principle of operation
The free market and its conditions have a certain type of interaction of all elements of the system.
The free competition market consists of participants who obtained their property without threats, fraud and other dishonest actions. Free market models are characterized by fair competition.
None of the participants are in a better position.
The concept of an ideal and a free market should also be separated. In the first case, all participants have complete information about the system in the presence of perfect competition. For a free market, this is not necessary. Therefore, if you want to determine what type the compared model belongs to, list the main features of the free market, which will be discussed later.
Signs of a free market
The main features of a free competition market include the following definitions.
- Freedom of choice for entrepreneurs and consumers.
- The decisive role is played by private property.
- Free competition: both between sellers and between buyers.
- The main motive for the activities of market entities is personal interest.
- Another participant cannot influence the decision of one participant.
- Unlimited and a sufficiently large number of business units.
- Lack of significant influence by the state on the participants in the system.
- Free access to information for all subjects of market relations (but not necessarily its possession).
- Absolute mobility of production factors.
So briefly we can outline the main principles of this concept. In the process of comparing a real system with an ideal, list the main features of a free market. This will allow us to correctly analyze the economic situation at the object in question, to highlight its main features, which coincide with the basic model.
Monopoly and Monopsony
The development of a market economy involves the approximation of the real conditions of the system of economic relations to its theoretical definition.
The main sign of market functioning according to the principle of free competition is the free entry and exit from the system of each participant. Therefore, an infinite number of subjects can be involved in economic relations.
According to the definition of a free competition market , neither monopoly nor monopsony can exist in it. In the first case, only one manufacturer acts in the process of interaction between sellers and buyers. At the same time, he may dictate his terms to other participants.
Free market economies also prevent monopsony. This means that in such a system, only one customer cannot exist.
Factor mobility
The free market model assumes the second main factor - the mobility of all means of production. This means that, if necessary, a business entity can transfer all its capital to another industry and begin to function freely here.
However, this is in reality unattainable. Each industry is distinguished by its size, as well as the size of the originally contributed capital. Therefore, a company operating in the field of organizing concert performances of artists will not be able to move into the field of engineering. She does not have enough start-up capital to start production activities.
Disadvantages of the free market
Disadvantages of the presented model are also available.
These include a number of factors. So, by the definition of the organization of interaction of the subjects presented, not all able-bodied citizens will be able to find work. This will be available only to people who are fluent in production skills that are in demand.
Moreover, socially significant industries (nature protection, defense) will not develop. Also, the free market does not stimulate the development of fundamental scientific discoveries. They from this point of view become unprofitable. Only the best-selling industries and directions are being developed.
This is an unstable system with frequent recessions and recessions. Therefore, in a theoretical form, a free market, the features of which are listed above, may exist. But not in real life.
Free Market Benefits
The main advantage of this system is the absence of a shortage of goods. At the same time, manufacturers in the process of manufacturing a competitive product are thinking about improving its quality.
Innovations are constantly being introduced in the field of the sectors that are in demand. Enterprises operating in such conditions quickly adapt to the ever-changing factors of market reality. They are oriented to demand, therefore they produce the products that the consumer needs.
Also, buyers have the opportunity to choose the best product for themselves. This, of course, is a significant advantage of the presented model of market relations.
Having become familiar with such a concept as a free market, the signs of which will help to better understand its essence, it will be easy to compare the real business system with the theoretical one. Based on this, conclusions can be drawn about the strengths and weaknesses of trade relations between all participants. In reality, the existence of a free market is impossible.