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Tuesday, March 25, 2008

Explanation of Free Market

How the Free Market Works

Juanv
Imagine that you walk into a coffee shop and tell the barista that you want a large cup of cappuccino.

"I will agree to give you a title and deed to this coffee," the barista tells you, "and you can use it however you wish. But this is not a charity. You will have to work for it."

If both of you find the terms acceptable, you would walk away with the coffee, and the barista would place the $5 bill in the cash register.

In that way, price plays a very important role in a free market. At its core, it is characterized by the following attributes:

  • The owner is free to set his own prices and terms, and
  • You are free to accept or reject those prices and terms.
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