Explain the advantages and disadvantages of free market economies.

A free market economy has two key advantages. First, it allows for individuals to innovate. Individuals have the freedom to create new ideas, new products, and new services to sell for profit. They are not required to only produce what the government tells them to produce. Due to this freedom, competition is created, forcing companies to create new products and features. A clear example of this is the cell phone market. New phones come out each year, as individuals create new ideas and new features for their consumers.

The second major advantage is that customers drive decisions. If a customers wants a certain product or feature, the producer must meet their needs in order to survive. This ultimately drives the price, as customers determine the price of products.

However, disadvantages are created from some of the advantages. Profit motive drives businesses, but can create dangers. Poor working conditions and unethical decisions can be made as entrepreneurs seek higher profits. Secondly, free markets can lead to market crashes as we saw in the great depression and the economic downturn in the early 2000's. Unemployment can lead to devastation of families.

These advantages lead to economic growth and expansion during the business cycle. However, during times of crashes and downturns, government regulation usually occurs to spur expansion again.

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