economics essay

Topics: Supply and demand, Market economy, Free market Pages: 7 (1974 words) Published: October 11, 2013
BUSINESS SCHOOL - Undergraduate Assignment Feedback Frontsheet

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Economics essay
David Singh
Student number: u1144124

Question 1:
It can be argued that most countries adopt some form of mixed economy, disregarding a free market economy which forms automatically. A mixed economy is where there is some form of government intervention, such as corporation tax Hall et al 2010 p670-671 “tax on profits of private and public limited companies” which is to ensure the populations welfare. In contrast a free market economy is “one which there is an absence of government intervention. Individual producers and consumers are free to make their own economic decisions.” Sloman, Hinde and Garrat 2010 p60. Within a free market economy firms are generally able to set prices to their desire, and do not have to comply with a great deal of laws, for example when a firm looks to acquire another firm, laws may be relaxed in regards to how much market share or power one firm can have. This type of economy generally works around the forces of supply and demand of a respective commodity. In cases of demand falling short of the supply of a respective commodity, the price will fall as opposed to a price rise when the supply is inadequate to meet the growing demand of a good or service. Those who favour this structure point out that government intervention does cost us through taxes, as the more intervention the higher the taxes needed; therefore the majority of those who pay taxes have little control over what the money is used for. Despite the benefits of a free market economy most countries still comply with a mixed economy, there are a number of reasons for this. One being that countries argue some form of control is needed to ensure that consumers are not exploited, Hall et al 2010 p699 “Government creates the legal and regulatory framework which govern the way in which businesses and individuals relate to each other”; government policies ensure that firms cannot charge want they want, ensuring that consumers are not exploited. In addition governments who choose to acquire such an economy believe that services such as healthcare should be run by the government. Taxes and subsidies forces firms to take into account social costs and benefits in regards to their business...
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