By Mary Bailey
A market system in which prices for goods and
services are established freely by between
vendors and consumers , in which the laws
and forces of supply and demand are
unrestricted by the governments interest.
A free market economy is a market based
economy where prices for goods and supplies
are set freely and supply and demands are
allowed to reach their point of equilibrium
without government plans and support there is
a more competitive market.
Law of Demand
and Law of Supply
The law of demand is represented graphically by a
downsloping demand curve.
The law of supply states that the relationship
between price and quantity in the mind of sellers
or producers is a direct one.
Supply and demand is a model of price
determination in the market. It concludes that in a
competitive market, the unit price for a
particular good will vary until it settles at a point
where the quantity demanded by consumers will
equal the quantity supplied by producers, resulting
in an economic equilibrium for price and quantity.
The Four Basic Laws of Supply
If demand increases (demand curve shifts to the
right) and supply remains unchanged, a shortage
occurs, leading to a higher equilibrium price.
If demand decreases (demand curve shifts to the
left) and supply remains unchanged, a surplus
occurs, leading to a lower equilibrium price.
If demand remains unchanged and supply increases
(supply curve shifts to the right), a surplus occurs,
leading to a lower equilibrium price.
If demand remains unchanged and supply decreases
(supply curve shifts to the left), a shortage occurs,
leading to a higher equilibrium price.
Equilibrium Market / Efficient
Market Theory (EMT)
The supply of an item is exactly equal to
Prices are usually stable in this type of
The efficient markets theory of...