Free market economy In a free market economy, most economic decisions are made by private individuals and organisations. The government plays very little part in deciding what is produced, how or for whom. In this economy there are few public sector organisations, few taxes and low levels of government spending.
The Philippines has one of the most free market economies in the world
Advantages of free market economies: A wide variety of goods can be produced. Firms can respond quickly to the needs of paying customers if they see a profi t opportunity. Firms need to be creative and effi cient if they want to be competitive and stay in business. There are very low taxes as there are few public services for the government to spend money on.
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Disadvantages of free market economies: Only profi table goods and services will be produced by private fi rms. Important, but unprofi table services such as public lighting, schools, social welfare, hospitals and postal services may not be provided. Goods and services are only for paying customers. Private fi rms will only supply products to consumers who are able to pay for them. Customers with more money have more choice but poorer customers have less choice. Harmful goods such as military weapons may be produced if it is profi table to do so. Also, to save money, dangerous and highly polluting waste products such as toxic chemicals could be dumped in rivers and lakes because there are few or no government controls to prevent this. Private fi rms will often try to create a monopoly for themselves to maximise their profi ts at the expense of consumers. With little government regulation, private monopolies and oligopolies may be common.
