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Free Market
In a ‘free market economy’ the suppliers have the freedom to supply and the consumers have the freedom to consume and exchanges are done with mutual consents. The level of production and consumption is based solely on the ‘free price system’. This means that all decisions on What to produce? How to produce? For whom to produce? are dictated by the price which influences the supply and demand.
Law of Demand
Demand for a good or a service is consumers having the willingness and capability to complete the exchange. The law of demand states that all other factors remaining constant there is an inverse or negative relationship between the quantities demanded and the price meaning when the price increase, less of the product is demanded and vice-versa. This relationship is known as the demand relationship and it varies from between products and markets.
Demand Curve

When the price falls from P1 through P2 down to P3, quantity demanded increases from Q1 through Q2 up to Q3 and vice-versa.

A movement along a demand curve is when a change in price occurs but the demand relationship remains constant, while a shift in demand is when there is a change in quantity demanded even if price remains constant. The demand curve shift inwards or outwards as a result. E.g. caused by an improvement in technology used in production or devaluation of currency.
Law of Supply
Supply is when a producer makes a good or service available for consumption. There is a direct positive relationship between quantity supplied and price. Meaning higher the price the more of the good is produced and vice-versa. As per the graph the supply relationship slopes upward.
Supply Curve


A movement along a supply curve is when a change in price occurs but the supply relationship remains constant, while a shift in supply is when there is a change in quantity supplied even if price...