It is everyone’s goal in life to have the freedom to create economic opportunities for themselves without the fear of intervention. This concept is what a free enterprise economy provides. Also known as capitalism, this economic system allows individuals to create their own business and find economic growth. The laws of supply and demand control the free enterprise economy. In other words, the value of goods and services are determined by the market. Take paper for example. If paper were a resource that was scarce, but high in demand, the price would be very high. Now, if paper was widely available and the demand was low, the cost would be low. Based on this structure, the free enterprise system typically leads to socially acceptable prices assuming there is enough competition in the economy.
The Benefits of Free-Enterprise
There are many benefits to the system of a free enterprise economy. It aligns with one of the fundamental principles of economics: people respond to incentives. The most prominent incentive is the financial reward that comes with hard work and creating a successful business. In this system, people can earn based on their work. Other systems such as a communist system give certain wages regardless of how much one works.
The free enterprise economy also forces producers to provide goods and services efficiently. Any firm that is creating products efficiently will make a better profit than competing businesses who are not performing up to the standards. This level of competition puts pressure on companies to innovate and think of new ways to produce better goods and services to outsell their competitors. The real winners in this situation are the consumers who benefit from the high-quality products offered.
There is also a level of free will associated with a free enterprise economy. Everyone has the opportunity to create their income however they choose. For example, there is nothing stopping someone interested in fashion from opening up a boutique and generating a profit from that business.
The idea of a free enterprise economy is meant to provide everyone the opportunity to create their own wealth. Anyone with a goal and the right work ethic can find success. This economic freedom also boosts healthy competition. The market forces firms to provide quality goods and services that reflect the value determined by the laws of supply and demand. Consumers benefit because it assures that there will be high quality goods at affordable prices. Utilized the right way, the free enterprise system benefits all parties involved.