Create a 12 page essay paper that discusses Free Market System and Arguments in its Favour.
In the fee market system, prices are also set by supply and demand, and there is no government intervention. Resources are allocated based on demand of those resources and their supply. The term ‘free market’ refers to the freedom from governmental control and regulations. Market forces set regulation themselves through supply and demand. Arguments given in favour of free market system will be discussed in this section. It is important to understand the concept of supply and demand if we want to understand free market system of resource allocation. Supply refers to the quantity of product that can be supplied by firms. Demand refers to the quantity of product demanded by the consumers. The place where demand and supply curves intersect is called equilibrium price. In free market system resources are allocated through supply demand curves only with no intervention of government. Source: Proponents of free market system argue that markets balance or correct themselves and there is no need for any government intervention. According to Adman Smith, an invisible hand balances supply and demand forces and maintains equilibrium (Smith, 1776, Book IV). Invisible hand refers to the ability of the market to balance itself without government intervention, and this is the essence of free market system of resource allocation.