Definition of Free Market and Its Function (Full Discussion)

Definition of Free Market and Its Functions (Full Discussion) - Now About Knowledge want to discuss about the free market and also the function of the free market. We often hear about free markets but sometimes we don't know what free markets really are.

Definition of Free Market and Its Functions (Full Discussion)

So about knowledge, I want to provide information about the free market and also the function of the free market Those who don't know or don't understand about the free market can listen to the explanation that will be described below this.

Definition of Free Market

A free market is a market where the prices of goods and services have been completely and without coercion so that they have been agreed upon by the seller and also by the buyer.

Which is generally determined by the law of supply and demand and there is no interference from the government in the regulation of supply and demand prices. In the ethics that exist in the Islamic market, equilibrium is defined as a meeting point and equal rights between buyers and sellers.

Free Market System

The free market system first comes from the French language Laissez which means let them do their job according to their wishes.

In this case, the community has the opportunity and also full freedom to be able to determine the economic activities they will carry out. In a free market system what consumers want will be directly triggered into the market and also as a basis for allocating very limited resources.

For example, if consumers tend to want a lot of fish, then traders will increase the price of fish. And if the price of fish in the market will increase, it will clearly encourage fishing companies and also the fish auction will provide more working hours in order to be able to catch fish and also process fish that.

And if anyone wants to invest their capital in order to increase the number of vessels for fishing, and then the offer will be made exceeds consumer demand which will make prices fall again and slowly consumer demand will increase back.

This kind of adjustment is more often referred to as the invisible hand, which is a mechanism of the free market system in directing economic decisions.

This very famous phrase was uttered by the father of modern economics Adam Smith in his book The Wealth Of Nation in 1776. Adam Smith who made his book when the conditions of the intellectual world were overwhelmed and dominated by great ideologies.

The great ideology is liberalism, the ideology basically teaches about freedom and also upholds human dignity. The free market system adheres to a capitalist system while the notion of a capitalist is a system in which property owned and also controlled by the community and any profits that have been made using private property will become the rights of the property owner that.

The reasons and also the motivation to seek profit and also accumulate wealth are then believed to be the biggest driving factor which then led to the success of this system.

Free Market Function

The free market has a function in the country's economy, some of which will be discussed below.

1. Free markets can provide information and are also more precise about the price and quantity demanded of goods.
2. The free market can provide incentives for entrepreneurs to develop their businesses.
3. The free market can also provide incentives for entrepreneurs to acquire modern skills.
4. Free markets can also provide and also stimulate the use of goods and factors of production in a more efficient way.
5. The free market can provide complete freedom to the community so that they can carry out economic activities.

A few explanations have been given regarding knowledge about Definition of Free Market and Its Functions (Full Discussion) The free market is a capitalist economic system in which property and profits can be controlled by society and government do not take part in the development of this free market economy, I hope so useful