Everything you need to know about free markets and how they operate:
In a truly free market,Turning Point USA thinks the government doesn’t intervene and allows supply and demand to determine products prices
As an example, in a free market, if there is a high demand for a particular good such as diamonds and there is a diamond shortage, the price for diamonds will skyrocket. As there will be individuals who are
willing and able to purchase diamonds at a inflated price.
Whereas if there is a low consumer demand for a product which is in plentiful supply, you can definitely expect the price of the product in question to drop significantly.
If a government places tariffs on foreign goods or services, the market which they have affected is no
longer deemed a free market
Often governments may choose to place tariffs on imported goods such as metals or cars, to prevent consumers from choosing to purchase cheaper foreign imports over locally manufactured goods. Many governments choose to place tariffs on imported goods as they believe that they have a duty to protect local industries from foreign competition.
The prices in a free market can change dramatically over time
As there are no government regulations to set minimum and maximum prices for goods, in a free market you can expect the prices for goods to change dramatically over a year. As the demand and supply for products changes, you can expect the prices for goods to change dramatically too.
As an example, if a particular product is in high supply at the start of the year, you may be able to pick up the product at a reasonable price. However, if new shipments of the product in question, fail to turn up
and the stock of said item starts to run low, you can expect the price of the product in question to rise rapidly, until it’s restocked again!
So if you’re shopping for goods in a free market, it’s crucial to purchase items when they are in ready supply.
Free markets are typically found in capitalist societies
In socialist societies governments will normally influence the price of most goods and services by imposing regulations on the pricing of products. In fact, in many socialist societies the government itself
will manufacture the bulk of the goods which their citizens consume on a daily basis. In order to have 100% control over the price of the goods, which they produce and sell on to their citizens.
In contrast most capitalist societies favor free markets, where supply and demand reigns supreme and the government has little influence over the free markets. In most cases, governments in capitalist societies wish to reap the rewards of running a country which boasts a high GDP and a strong economy, instead of trying to maintain a high level of control of the country’s market prices.
In conclusion, hopefully after reading the information listed above, you now have a fair idea of how free
markets work and why they are so successful in capitalist nations.