Free Market + Market Forces

• A free market is a place where buyers meet supplies to exchange goods and services, free from any government intervention.
• At equilibrium in a free market, resources perfectly follow consumer demand, supply is exactly equal to demand, and allocative efficiency is attained.
• Market forces versus issues with market forces: The benefits of market forces include allocative efficiency, high competition, low prices, high consumer surplus, high quantity, high quality, high choice, high job creation, and freedom.
• The issues with market forces include excess demands, shortages, excess supplies, rationing, signaling, incentive, and government failure.
• Markets can fail due to assumptions not holding, such as markets being very competitive, having good information, and firms being profit maximizers.
• Market failures can occur due to monopoly or oligopoly power, information imperfection, and firms pursuing revenue or cost cutting.
• In the free market, prices are efficient but may not be fair, and there can be problems of inequity if there is wide inequality.
• Free markets promote competition, which can lead to lower prices and higher quantity.
• Excessive profiteering can occur in the free market, as firms pursue revenue or cut costs in dangerous areas like product standards, health and safety standards, environmental standards, or wages.
• Prices in free markets can be highly volatile, especially in commodity and agricultural markets, due to the high elasticity of demand and supply.
• Free markets promote great incentives for firms to produce goods and services that consumers want, and also for firms to reinvest to be dynamically efficient to try and hit higher profits.
• Markets can fail, leading to allocative inefficiency.
• Creative destruction can occur in the free market as firms enter markets looking to make some of that profit.