Free market: signs, definition, examples

A free market, the signs of which are present to a greater or lesser extent in different 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 forecast development, it is necessary to study the signs of a free competition market.

The concept of the market

The free market, the signs of which will be considered further, should be viewed from the position of a correct understanding of its essence.

This is not just the area where the purchase and sale operations are carried out, 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 mechanism for managing.

And the interaction of the subjects of trade relations is so free, that it allows you to vary prices for the same products.

This system of developing a market economy is based on the division of labor, when all products are produced not for their own consumption, but for exchange on the market.

Participants in this system are entrepreneurs, employees who sell their labor, and consumers. The subjects of the market are households, producers, as well as the government.

Any person can relate to each of these groups. Objects in the market are commodities and money.

Free market

The market of free competition is a system of management that is free from any external, external interference. Even the state does not regulate the processes taking place on it.

The only function allowed by the economy of the free market by 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.

The conditions of the free market presuppose the establishment of prices solely by means of a supply-demand relationship. 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 received their property without threats, fraud and other dishonest acts. Free market models are characterized by fair competition.

None of the participants is in a better position.

Also, the concept of an ideal and free market should be divided. In the first case, all participants have complete information about the system in the presence of ideal competition. For the free market, this is not necessary. Therefore, if you want to determine which type of model the model belongs to, list the main features of the free market that will be discussed later.

Signs of a free market

The main features of the free competition market include the following definitions.

1. Freedom to choose entrepreneurs and consumers.
2. A decisive role is played by private property.
3. Free competition: both between sellers and between buyers.
4. The main motive for the activity of market subjects is personal interest.
5. The decision of one participant can not be influenced by another entity.
6. Unlimited and quite a large number of business units.
7. Absence of significant influence on the part of the state on the participants of the system.
8. Free access to information for all subjects of market relations (but not necessarily possession of it).
9. Absolute mobility of production factors.

So briefly it is possible to designate the main principles of the concept under consideration. In the process of comparing the real system with the ideal, list the main features of the free market. This will allow to correctly analyze the economic situation on the object under consideration, to highlight its main features that coincide with the basic model.

Monopoly and Monopsony

The development of a market economy implies the approximation of the real conditions of the system of economic relations to its theoretical definition.

The main feature of the functioning of the market on the principle of free competition is the free entry and exit from each participant's system. Therefore, an infinite number of subjects can be involved in economic relations.

According to the definition of the market of free competition, it can not exist either monopoly or monopsony. In the first case, only one producer acts in the process of interaction between sellers and buyers. He can at the same time dictate his terms to other participants.

The economy of the free market also does not allow the emergence of monopsony. This means that in such a system there can not exist only one buyer.

Mobility of factors of production

The model of the free market assumes the second main factor - the mobility of all means of production. This means that, in case of need, a business entity can transfer all its capital to another industry and begin to function freely there.

However, this is in reality unattainable. Each branch is distinguished by its size, as well as by the size of the initial capital introduced. Therefore, the company, operating in the field of organization of concert performances of artists, will not be able to move into the field of engineering. She will not have enough seed capital to deploy production activities.

Disadvantages of the free market

Disadvantages of the presented model are also available.

These include a number of factors. So, by definition of the represented organization of interaction of subjects, not all able-bodied citizens will be able to find work. This will only be available to people who are in perfect production skills, in demand.

And socially significant branches (nature protection, defense) will not develop. Also, the free market does not stimulate the development of fundamental scientific discoveries. From this point of view, they become unprofitable. Only the industries and directions that are in demand are being developed.

This is an unstable system with frequent recessions and recessions. Therefore, in a theoretical form, a free market, the characteristics of which are listed above, can exist. But not in real life.

The advantages of a free market

The main advantage of the system considered 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 sphere of the industries that are in demand. Enterprises operating in these conditions quickly adapt to the constantly 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 acquainted 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 economic system with the theoretical one. Based on this, it is possible to draw conclusions about the strengths and weaknesses of trade relations between all participants. In reality, the existence of a free market is impossible.