A free market is whereby the economic productions are run and controlled by private individuals and firms, without strict intervention of the government (Ertuna, 2009). However, in one way or another, governments usually involve themselves in the implementation of certain laws and certain public services, even if only national defence (Economic Help, 2007). The proponents of free markets, for example, Adam Smith in his book “The Wealth of Nations”, say that, free markets leads to better production of goods and services, hence high quality of the same to consumers. This is because producers and suppliers aim at maximizing their utility resulting to better goods and services to consumers. Free markets also encourage competition among producers. This leads to researches bringing about innovations in terms of what the consumers prefer (ibid). This in turn brings about new products in the market, leaving consumers with a wide variety of products to choose from. The ultimate effect of these is the reduction of prices of goods and services; a big advantage to consumers.
Despite the many benefits that consumers enjoy from a free market, there are negative impacts because it gives rise to an imperfect market. An imperfect market is where relevant information is not made readily available to buyers and sellers (Wise Geek, 2013). The characteristics of an imperfect market are as elaborated by Economic Help (2007). Monopoly; this is a market that is controlled by one goods or service provider. A non controlled market or one with single or few suppliers may lead to rise in the prices of goods and services. In a monopolized market, there is no free entry or exit as there exist barriers to the exit or entry in this kind of markets. Here, the producer will often produce a volume that is less than the amount which would maximize social welfare. Oligopoly is another characteristic of imperfect market. It is a market conquered by a small amount of suppliers who are capable of jointly taking control over market prices and supply. Oligopoly also results to a market with homogeneous goods, thus leaving customers with limited range of choice.
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An uncontrolled market provides no social security for the citizens who are unemployed or those employees on low income. It also tends to benefits a small number of people who have the advantage of property and monopoly power in the markets.