A free market also ensures that people can run their business in whatever way they see fit, without being disadvantaged by outside forces. This type of relationship is called freedom of contract. A free economic system compels entrepreneurs to provide the wishes of the consumer by consistently seeking to offer not only better products but also new products that fulfill consumers' needs. However, a free economic system does more than satisfy the needs of the majority; it also allows for groups with special interests or needs to have their needs met much better than they could in an economy with strong central planning. In the end, the free economic system can fulfill almost everyone's needs and wants, while ensuring profit for everyone.
TASK 1 PART A SOLE PROPRIETORSHIP: A sole proprietorship is an organization in which the business is owned by a single individual. This is an easy organization to start, as the individual simply provides the goods or services, charges money, and begins doing business. The individual is also in charge of making all decisions involved with the business. In a sole proprietorship the owner and business are considered one, which can make it difficult to get the necessary funding as the owner must provide all personal financial statements. The owner is also held responsible for all legal and financial liabilities.
* Control: Because there is only a single owner, a sole proprietor has control of all aspects of the business. The owner makes all of the decisions in how the business is to operate. * Profit retention: A sole proprietor keeps all profits of the business and does not have to share them with another individual. If the sole proprietor employs others, then it is the responsibility of the owner to pay the employees. * Location (expansion): Relocating to another state for a sole proprietorship is simple.
Running head: Business Law Rachel Lavender Western Governors University 2/21/11 PART A Sole Proprietorship A sole proprietorship is how most business entities begin. This type of business is owned and operated by one person. The main advantage of this type of business is that the owner does not need to get the approval of a partner or board in order to make decisions. A significant disadvantage is that, in a sole proprietorship, there is no separation from the business and personal assets, therefore, there is unlimited personal liability to the owner’s personal assets. · Liability-There is no difference between personal and business assets.
Also, all firms produce a homogenous product, with little to no branding, where products are perfect substitutes for each other in the market such as milk. In addition, there is perfect mobility, so buyers do not incur any cost for moving from one seller to another. Lastly, buyers and sellers possess perfect knowledge of the prices and the output, therefore if one seller charges a higher price than the market price, buyers will move elsewhere. Hence the firm has to accept the market price if it wishes to sell its products in the market. The market price becomes the firm’s demand curve and this would be perfectly elastic since perfect
Murphy describes Capitalism “as a system in which people are free to use their private property without outside interference” (Murphy, p. 1). It is also known to be referred to as a “free market” simply because it gives people the option to make their own decisions. This idea can be summed up in the phrase “laissez-faire”. The idea is that society contains within itself the capacity for ordering and managing its own path of development. “It follows that people should enjoy the liberty to manage their own lives, associate as they please, exchange with anyone and everyone, own and accumulate property and otherwise be creative by state expansion into their lives” (Tucker, n.p.).
This view indicates supply will never change to adjust to meet consumer spending. The demand can move by changes and the produced items change in price to match consumer spending. The Keynesian economics looks at the problem of supply and demand separately. Basically, supply generates income. What people make other people buy, and so the value of supply is always equal to the value of income.
All three of these ways are used throughout the world weather people know it or not. What market would you like to live in and what do you think they mean? First we have a Capitalism market, which is when your productive resources are privately owned. Also, allocation of resources is by price and the lure of profit. The last thing you want to know about capitalism is that the role of government is limited.
In other words, the diagram describes a pure model economy with no government intervention. In addition, the diagram divides markets into two categories: Markets for goods and services, and markets for factors of production or factor markets. Goods and services markets are usually what comes to mind when people think about markets. Firms represent the seller of goods and services while households represent the buyers of goods and services. Products flow from the firms to the consumer or households thru the market.
Capitalism mostly has free market economy, which means that people buy and sell things by their own judgment. 2. What do property rights mean? Property rights are particular constructs in economics for determining how a resource is used and owned. Resources can be owned by individuals, government or associations.