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There is no one best economic system to adopt. Although the free market economy can be advantageous and beneficial to the society, there are problems that the free market economy can give rise to.
In a free market economy, there are wide varieties of goods and services that are produced to suit a consumer’s wants and needs. Because of the fact that the prince mechanism allows the consumers to signal the producers to produce goods and services, the producers will then respond to the wants and needs of the people. As such, wide range of goods and services will be produced for the paying consumers.
Also, the free market economy responds quickly to consumers’ wants and needs. In a free market economy, when consumers are able to afford any goods or services, these will become profitable and producers will quickly deploy more resources to produce them. However, when the goods and services are no longer profitable, resources will then be diverted to other products.
Although a free market economy has such advantages, it also has its disadvantages. In a free market economy, producers will only produce goods and services if they a profitable. The factors of production will only be employed if it is profitable to do so. When scarce resources do not have profitable uses, they will be unemployed. Workers become unemployed when producers feel that workers are not profitable to be employed.
The free market economy also encourages the consumption of harmful goods. Some people may want to purchase harmful drugs and when they are able to afford it at high prices, producers will find them to be profitable and produce these goods. However, the production of these drugs is dangerous and may need government intervention to ban the production and consumption of them.
These show that although the free economy is able to allocate scarce resources based on the wants of the consumers, it is not the best economic system to adopt.
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