Definition
Private buyers and sellers make decisions with relatively limited government direction, though property law, contracts, and basic regulation still exist.
Political Dictionary
Free Market
A free market is an economic system in which prices and production are shaped mainly by voluntary exchange.
Why It Matters
Free markets are associated with competition, innovation, choice, and price signals.
How It Works
Supply, demand, profit, loss, and competition coordinate activity.
History
Free-market ideas developed strongly through classical economics and opposition to mercantilism.
Example
Competing businesses adjust prices and products based on consumer demand.
Common Misconceptions
- A free market has no laws.
- All markets are perfectly competitive.
- Free markets guarantee equal wealth.
Related Terms
Related Topics
See Also