Free market system Meaning: Definition, Examples, and Translations
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free market system
[fri หmษหrkษชt หsษชstษm ]
Definition
economic system
A free market system is an economic system in which prices are determined by unrestricted competition between privately owned businesses. In this system, the forces of supply and demand set the prices of goods and services. Government intervention is minimal, allowing for maximum economic freedom.
Synonyms
capitalist system, laissez-faire economy, market economy.
Which Synonym Should You Choose?
| Word | Description / Examples |
|---|---|
| free market system |
This term is used in the context of an economic environment where supply and demand are regulated by consumers and businesses without much government intervention.
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| laissez-faire economy |
This phrase describes an economic environment with minimal or no government intervention, leaving all decisions to the market forces of supply and demand.
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| capitalist system |
This term is used when referring to an economic system based on private ownership of the means of production and operates for profit. It can sometimes have a negative connotation depending on the context.
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| market economy |
This term is used to describe an economy where decisions regarding investment, production, and distribution are driven by market forces. It is a broader and more neutral term compared to more specific phrases like 'capitalist system' or 'laissez-faire economy'.
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Examples of usage
- The United States is often cited as an example of a country with a free market system.
- In a free market system, individuals have the freedom to start businesses and compete with each other.
Translations
To see the translation, please select a language from the options available.
Interesting Facts
Historical Origins
- The concept has roots in the works of Adam Smith, particularly his book 'The Wealth of Nations' published in 1776, which advocated for minimal government intervention.
- The Industrial Revolution played a key role in expanding free market practices as new innovations required fewer restrictions to grow businesses.
Economic Theory
- In a free market, resources are allocated based on consumer preferences and competition among businesses.
- Supply and demand are the primary forces that determine prices, reflecting the collective choices of individuals in the market.
Global Perspectives
- Countries with free market economies, like the United States, often promote entrepreneurship and innovation, driving economic growth.
- Critics argue that free market systems can lead to inequality, as wealth may be concentrated among those who already have resources.
Pop Culture
- Movies like 'The Social Network' and 'Wall Street' explore themes of capitalism and the free market, showcasing successes and ethical dilemmas.
- Free market concepts often emerge in discussions around technology start-ups and the gig economy, reflecting modern interpretations of entrepreneurship.
Origin of 'free market system'
Main points about word origin
- The term 'market' comes from the Latin word 'mercatus', meaning trade or commerce.
- The idea of a 'free market' gained prominence during the Enlightenment, reflecting the belief in personal liberty and economic freedom.
The concept of a free market system dates back to the classical economists such as Adam Smith, who argued that individuals pursuing their self-interest would unintentionally promote the social good through the invisible hand of the market. The modern understanding of a free market system has evolved to emphasize competition, efficiency, and innovation.