How to Identify the Attributes of the U.S. Economy That Make it a Free Market System

As one of the largest economies in the world, the United States has achieved economic success with a free market economy. In such an economic system, the people of the United States ultimately decide what goods and services are produced. The federal and state governments limit their involvement in the free market to regulating areas of state or federal interest. For example, while respecting the right of privately owned television stations to air content, the federal government regulates the showing of indecent material.

Instructions

    • 1

      Think about your ability to purchase goods and services according to your personal tastes. In a free market economy such as in the United States, goods and services are produced based on the law of "supply and demand." Essentially, when more people want a particular product or service, companies respond to these demands. The companies respond to these demands to maximize profits.

    • 2

      Review the prices for the goods and services you generally desire. In the U.S.' free market economy, prices for good and services are set by two factors. The first factor is the price by which sellers want to sell the product. However, the price is also set by the amount of money that buyers are willing to pay for the product. If producers price their goods and services above what people are generally willing to pay for it, the businesses are failing to maximize profit.

    • 3

      Observe that the U.S. government generally does not own private businesses. Unlike communist nations such as China, the free market system in the United States entails a "hand off" approach in the ownership of private businesses. For example, the United States does not own the television station watched by U.S. citizens and residents. On the other hand, China owns and operates the "state run" television. The United States respects the ability of citizens to own and operate these corporations with limited government interference.

    • 4

      Review each of these attributes when thinking about the U.S. free market economy as a whole. The free market economy in the United States is driven by free enterprise and the laws of "supply and demand." It is characterized by the ability of private businesses to operate without extensive government intervention (regulation) or ownership.

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